How to Start an LLC in New Mexico? (Complete Guide)
Forming an LLC in New Mexico can be made straightforward by following the steps set forth by the state.
Although there are advantages forming an LLC in New Mexico, there are also some downsides you should consider before you make your decision.
Based on my experience as a business consultant, and in collaboration with our panel of experts, our collective effort will provide an in-depth guide on how to form an LLC in New Mexico.
Quick Summary:
- To start an LLC in New Mexico, follow the necessary steps and submit the required documents.
- As an LLC, the members have the option to pick the tax classification of the company.
- An LLC provides limited liability protection, taxation benefits and a less structured business entity.
How To Start an LLC in New Mexico
Before you could start an LLC in New Mexico, there are several steps you need to take. All of them are equally important because they ensure that your LLC will stay compliant with the state.
Step 1: Name Your New Mexico LLC
A limited liability company in New Mexico is required to have a name that complies with the New Mexico LLC naming requirements.
Before you finalize a name, make sure that it is unique and not used by another New Mexico LLC or corporation.
You should also check to see whether there are any similar names registered with other state agencies (such as trademarks).
You can use the New Mexico business search when looking for an available name.
Here are the following naming guidelines, rules and restrictions that have to be complied with:
- The name should be unique and not in use by any other entity registered in New Mexico.
- It must contain the words limited liability company or its variation, LLC.
- It should be easy to remember and clearly state the nature of your business.
- It should not end with any punctuation, such as dashes or periods.
- The business name cannot contain any restricted words, such as a bank, insurance, attorney, or any other words that are associated with a government agency (FBI, IRS, Department, etc.) [1].
If you want to reserve a desired business name for your LLC, complete a form for the Application for Reservation of a Limited Liability Company Name and file it with the New Mexico Secretary of State.
A $20 filing fee for this service will keep your LLC name reserved for the next 120 days.
Read More: Looking Up an LLC in New Mexico
Step 2: Appoint a New Mexico Registered Agent
Every New Mexico LLC has to appoint a registered agent.
This person or company will receive official paperwork and notices from the state on behalf of your LLC. They also handle important documents like the operating agreement.
A reliable registered agent must have a physical address in New Mexico and be available during regular business hours.
New Mexico registered agents must sign a service agreement with your LLC.
This document states that the registered agent agrees to accept legal papers on behalf of your company.
The cost of your registered agent service will vary depending on the company that you choose.
The annual cost usually starts around $40 but can go up to $200 or more. Ask your registered agent service about any additional fees they may charge, such as preparing and filing New Mexico LLC annual report.
Remember, it's important to keep your contact information updated with the state of New Mexico. If you ever change your registered agent service, be sure to let the state know.
Step 3: Write the LLC operating agreement
The New Mexico LLC operating agreement is a short document that contains the terms of the management and operation of an LLC.
The document is prepared by a single member or all members (if there are multiple members) through which they regulate certain issues like:
- Appointment/Removal of managers
- Dividends and profits
- Voting rights
- Resolving disputes among members
Operating agreements are not filed with the New Mexico Secretary of State, but they should be kept in the company's records.
All New Mexico LLCs should have an operating agreement, even if there is only one member.
If you don't have an operating agreement, the default rules will apply, and you might lose your rights as an LLC member.
The New Mexico Secretary of State provides a sample of operating agreements on their website that can be used by single-member LLCs or multiple-member LLCs with equal voting interests.
If there are more than two members in an operating agreement, consider hiring legal counsel to help draft the document.
Step 4: File LLC Articles of Organization
New Mexico LLC Articles of Organization is a document filed with the New Mexico Secretary of State to create an LLC.
New Mexico Articles of Organization are not complex, but they are as important as the operating agreement.
They contain key information about your company that other businesses and the state will use to contact you and verify your company's existence.
Make sure to include the following information in your Articles of Organization:
- The name of your LLC
- The registered agents for your LLC
- The address of the principal office for your LLC
- The name and address of each owner of the LLC
- Purpose and nature of the business
- Other information that may be required by the state
You must also submit a signed Designated Initial Registered Agent Statement of Acceptance of Appointment when submitting your document.
Articles are filed online through the New Mexico Secretary of State website accompanied by a $50 filing fee. See our article for more information on the cost to start an LLC in New Mexico.
Step 5: Obtain an EIN
Business entities in New Mexico are required to obtain an EIN.
An employer identification number (federal employer identification number or federal tax identification number) is a unique number that is assigned by the Internal Revenue Service (IRS) to identify a business entity.
EIN is necessary for every business entity that wants to hire employees or open a bank account.
This number will also be used to pay state income taxes or all other taxes owed to the federal government.
There are a few ways to obtain an EIN: online, by fax, or by mail. For more information on how to apply for an EIN, visit the IRS website.
Step 6: Open a Business Bank Account
LLCs offer excellent personal liability protection. However, it is important to keep the LLC owners' personal assets separate from the LLC's assets.
To ensure that your assets are protected, open a separate bank account for the LLC and get a separate business credit card you will not use to cover personal expenses.
The first person named in the Articles of Organization should apply for an EIN and open one business checking and savings account with this number.
By keeping your personal and business accounts separate, you will lower the chances of LLCs piercing the corporate veil and losing your personal assets in the event of a lawsuit.
Step 7: Get Licenses and Permits
Business licenses and permits are required for many types of businesses. You will need to contact your local government office to find out what licenses and permits you need.
Some common licenses and permits include:
- General business license
- Tax Permit
- Health department permit (if you're selling food or beverages)
- Fire department permit (for restaurants, bars, and other businesses with fire hazards)
- Zoning permit (if your business is in a restricted area)
- Seller's permit (required for businesses that sell taxable items)
If you are starting a professional limited liability company in New Mexico, you will need special business licenses traditional LLCs might not need.
New Mexico's Regulation & Licensing Department handles state-level licenses, so make sure to check with them.
New Mexico LLC Taxes
By default, single-member New Mexico LLC is treated as a sole proprietorship for tax purposes, while multi-member LLCs are treated as partnerships.
This business structure offers additional flexibility, so LLCs in New Mexico can choose whether they want to be taxed as an S or C corporation.
Each tax election has its benefits and drawbacks, so it's important to consult with an accountant or tax advisor before making a decision.
New Mexico taxation is also favorable for businesses with income below a certain threshold. The first $50,000 of taxable income is taxed at a rate of only .575%.
This makes New Mexico an attractive place to do business for small companies.
LLC owners in New Mexico file their taxes on personal tax returns, and the LLC itself is not counted as a separate entity for tax purposes.
The New Mexico Taxation & Revenue Department handles Gross Receipts Tax (a tax on business income and taxable goods) and Employer Taxes (a tax on employee wages and benefits).
The Benefits of an LLC in New Mexico
The benefits of forming an LLC in New Mexico includes limited liability protection and pass-through taxation.
1. Limited Liability Protection
Owners have limited liability protection against business debts.
If business debts occur, a creditor can only go after an owner's personal property if they are personally liable for creating or maintaining the debt in question.
2. Pass-Through Taxation
A limited company in New Mexico offers pass-through taxation, meaning the company's profits are not taxed at the company level.
The owners of the LLC pass their income through to their personal tax returns and only pay taxes on the income they earn from the business.
This can be a huge benefit for small businesses, as it keeps costs down.
In addition to these advantages, New Mexico also has very favorable small company taxes (as low as $500 annually).
It should be noted that other states are starting to limit certain benefits of LLCs, so forming a company now may be more advantageous in the long term.
For these reasons, it is important to consult with an attorney before making any decisions about forming a limited liability company.
If you are looking for help building your LLC in New Mexico, please contact our office. We would be happy to assist you.
Related Articles:
- How to Close an LLC in New Mexico
- Premium LLC Formation Services in New Mexico
- How Long Does It Take to Form an LLC in New Mexico
FAQs
Does New Mexico LLC Have a Franchise Tax?
New Mexico LLC has franchise tax if the business entity is taxed as a corporation. The amount of the franchise tax is based on net income and ranges from $50 to $500 per year. There is also a minimum annual franchise tax payment of $50.
How Much Does an LLC Business License Cost in New Mexico?
An LLC business license costs $0 in New Mexico since it does not require a general license for limited liability companies.
How Do I Make an Anonymous LLC in New Mexico
You can an anonymous LLC in New Mexico by listing the registered agent as the organizer.
To hide your identity as an LLC owner, you can appoint anyone from your registered agents and LLC formation service to your attorney who can file the formation papers for you.
Does LLC in New Mexico Need Business Insurance?
An LLC in New Mexico needs to obtain general liability business insurance to protect the company from litigation that may arise.
If you are unsure about what type of insurance policy would be best for your LLC, consult with an insurance agent to find a policy that fits your budget and business needs.
Does New Mexico Allow Foreign LLCs?
New Mexico allows foreign LLCs to register and do business in the state. File the required documents with the New Mexico Secretary of State and pay the corresponding $100 filing fee.
How Do I Change My Registered Agent in New Mexico?
You can change your registered agent in New Mexico by amending the Articles of Organization and filing a Statement of Change of Registered Agent form with the New Mexico SOS.
Can I Use Myself as a Registered Agent in New Mexico?
You can use yourself as a registered agent in New Mexico since there is no requirement to hire a registered professional agent.
What Happens if You File LLC Taxes Late in New Mexico?
There is a 2% penalty imposed if you file LLC taxes late in New Mexico. You have the option to file an extension with the New Mexico Taxation and Revenue Department (TRD).
Starting an LLC in New Mexico
Starting an LLC in New Mexico may be accomplished by following the business protocol set by the Secretary of State. Simply comply with the procedure and file the necessary documents.
Starting a new business can be confusing, but you don't have to do it alone.
Hiring ZenBusiness will not only save you time and money in the long run but also help guide your company through its first few years of existence with a clear understanding of what is needed for success.
References:
- https://www.wolterskluwer.com/en/solutions/bizfilings/state-guides/new-mexico-llc-requirements
