By John Cunningham
Published: November 15, 2013
If you are a actor of a business association formed beneath the New Hampshire Business Association Act or any added accompaniment association law, and your association is advantageous cogent assets to shareholders who are New Hampshire residents, you should actively accede converting your association to an LLC in adjustment to assure them from the New Hampshire absorption and assets tax.
As continued as your aggregation is a state-law business corporation, your New Hampshire shareholders can’t abstain that tax. But if your association converts to an LLC and is appropriately structured, they won’t owe it.
For some New Hampshire shareholders, such a about-face can beggarly anniversary accumulation of hundreds, bags and, in a few cases, hundreds of bags of dollars. And the “statutory conversion” laws of New Hampshire, Massachusetts and abounding added states accomplish the action of converting corporations to LLCs almost simple.
Furthermore, a July 26 cardinal by the New Hampshire Department of Revenue Administration resolves in favor of New Hampshire taxpayers two aloft issues in the aloft conversions that fabricated some New Hampshire corporations afraid to appoint in these conversions.
The basal line
First, until the DRA issued the ruling, it was cryptic whether such a about-face would activate the New Hampshire absolute acreage alteration tax for converting corporations that endemic New Hampshire absolute estate. The aphorism makes bright that it will not.
Second, until the DRA issued the ruling, it was at atomic somewhat cryptic whether, if the LLC was an S corporation, its New Hampshire shareholders would be accountable to the I&D tax alike admitting the LLC was structured to abstain it. Again, the acknowledgment beneath the cardinal is acutely no.
In my view, the cardinal makes bright that this is the case not alone for LLCs that are S corporations for federal assets tax purposes, but additionally for those that are C corporations.
If you’ve gotten this far in this commodity and are apprehensive how a aggregation can be both an LLC and a C or S corporation, the acknowledgment is simple: “LLC” is a absolutely acknowledged term. “S corporation” and “C corporation” are absolutely federal assets tax terms.
This is why a aggregation that starts out as a state-law business association from a law angle and a C or S association from a federal assets tax angle can catechumen its acknowledged anatomy to that of an LLC yet absorb its tax anatomy as a C or S corporation.
The basal line: If your state-law business association is advantageous cogent assets to your New Hampshire shareholders, alarm your accountant and ask if you should catechumen your association to an LLC.
Attorney John Cunningham, of admonition to the Maner-based law close of McLane, Graf, Raulerson & Middleton, is columnist of “John Cunningham on New Hampshire’s New LLC Act,” accessible at cunninghamonnhllcs.com. All antecedent accessories in his alternation on the new LLC act are annal at NHBR.com.
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