The State of New Mexico has always been a top choice for individuals looking to start a limited liability company (LLCs). With its affordability and unique feature of allowing anonymous LLCs, New Mexico stands out as the ideal state to protect your privacy and assets. To assist you in saving time and having a better understanding of what to expect during the process, we have compiled this complete guide on how to start an LLC in New Mexico.
With its pleasant climate, affordable property prices, and advantageous tax policies, New Mexico attracts entrepreneurs wanted to start a business. Among the various business structures available, many of these entrepreneurs choose to form an LLC due to its ability to safeguard personal assets and provide tax flexibility. Whether you choose professional assistance from an LLC formation service or handle the paperwork, starting an LLC in New Mexico is easy.
#1: Name Your New Mexico LLC
#2: Create a Business Plan
#3: Get an Employer Identification Number (EIN)
#4: File Your Articles of Organization
#5: Hire a New Mexico LLC Registered Agent
#6: Get Business Licenses and Permits
#7: Know the New Mexico State Tax Requirements
#8: Create an Operating Agreement
#9: Check Business Insurance in New Mexico
#10: Fulfill Annual Obligations
#11: Market Your New Mexico LLC
1. Name Your New Mexico LLC
You can select two distinct business names when forming an LLC in New Mexico. The first is the official legal name of your LLC, which you must register with the state and the IRS. Additionally, you can choose a “doing business as” (DBA) name, which serves as an alternate name under which your LLC operates.
Adhering to the state’s naming requirements is important when choosing a name for your New Mexico LLC. Here are the key considerations:
- Your business name must include the terms “limited liability company,” “LLC,” or “L.L.C.”
- Your chosen name should be distinct from any existing businesses in the state. To check name availability, you can do a corporate business search on the Secretary of State’s website.
- Avoid using words that are associated with government agencies, like “State Department,” “CIA,” “FBI,” “Treasury,” and others.
- Be aware that certain restricted words like “bank,” “lawyer,” “attorney,” etc., may require additional documentation and licensure paperwork.
Reviewing the complete listing of regulations is advisable to ensure compliance with New Mexico’s naming rules. This will provide a comprehensive understanding of the requirements when naming your business in the state.
Reserve Your Maine LLC Name
If you don’t want another entity to claim your LLC name before you register it, you can reserve the name for a nominal fee. In New Mexico, you can reserve names for up to 120 days by submitting the necessary form and paying the required fee to the state authority. This allows you to secure the desired name while you finalize your registration process.
Additional Consideration:
URL availability. Securing a webpage may not seem essential initially, but you should consider reserving your domain name early. This ensures that you can create an online presence in the future. Before finalizing your LLC name, checking if the corresponding URL is available is wise.
Social media presence: Business owners should have a social media presence to make it easier for customers to find and connect with their business.
2. Create a Business Plan
A well-crafted business plan guides your company toward success, growth, and financial stability. A comprehensive business plan typically includes a mission statement, key organizational goals, hierarchical structure, workflow charts, market analysis, revenue projections, and measurable success metrics.
3. Obtain an Employer Identification Number
Obtaining an employer identification number is essential to ensure compliance and facilitate financial operations for your New Mexico LLC. This unique identifier, which serves as a tax identifier for your business, can be obtained free of charge from the IRS.
An EIN is mandatory for any individual or business entity that hires employees. You must also fulfill this requirement for tax filing and establishing a dedicated business bank account for your LLC.
Once you have obtained your federal EIN, the next step is to register your LLC with the New Mexico Taxation and Revenue Department. This process involves filing Form ACD-31015, which authorizes you to engage in financial transactions within New Mexico.
4. File Your Articles of Organization
To formally create your New Mexico LLC, you must submit the paperwork known as the Articles of Organization to the Business Services Division of the Secretary of State. You can complete it online by visiting the Secretary of State’s website and choosing the e-filing option for forming a Domestic Limited Liability Company.
New Mexico considers it a foreign LLC if another state has registered your LLC. To enable your foreign LLC to operate in New Mexico, you must file the Application for Registration (to conduct business in NM) online. This document requires a filing fee of $100. Both the Articles of Organization and the Application for Registration will require you to provide the following information:
- LLC name
- Purpose of the LLC’s establishment
- Name and address of at least one management member
- Physical street address, contact number, and email address
- Name and address of the New Mexico LLC’s registered agent
- Names and addresses of all LLC owners.
5. Hire a New Mexico LLC Registered Agent
Your New Mexico LLC needs to appoint a registered agent responsible for receiving important legal documents and tax correspondence on behalf of your business. You can designate an LLC member as your registered agent as long as they reside within the state.
When designating a registered agent for your New Mexico LLC, it’s important to note that P.O. boxes are not considered valid addresses. The registered office address must match the agent’s business address.
If appointing an individual or assuming the role yourself is not feasible for your business, there’s no need to worry. You can hire a professional company to act as your registered agent. The cost of the agent’s services typically ranges between $100 and $300, depending on the company and the specific services provided. It is advisable to read reviews and testimonials and ask detailed questions about the services you plan to purchase.
6. Get Business Licenses and Permits
Certain professions and industries in New Mexico require special licenses and permits for businesses to operate legally. These licenses are necessary for various sectors such as construction, architecture, food service, and alcohol sales. The licensing process can differ depending on whether it is a state-level or local-level requirement. You can use the resources provided by the New Mexico Business Portal to get the necessary licenses and permits, which can connect you with the appropriate state and local permitting offices.
7. Know the New Mexico State Tax Requirements
LLCs in New Mexico must pay federal taxes to the IRS while passing profits and losses to members. The LLC utilizes IRS Schedule K-1 to report financial details to its members, who then report them to the IRS accordingly. In addition to this tax status, New Mexico imposes certain state tax obligations on LLCs. One such requirement is filing an annual Income and Information Return for Pass-Through Entities, which can be done online through the state’s Taxpayer Access Point (TAP).
Other Tax Considerations:
- Sales tax: The state imposes a 5% sales tax rate, with localities having the option to add up to 4.313%. After registering your LLC with the New Mexico Taxation and Revenue Department, you must collect and remit the applicable sales taxes.
- Employer taxes: If your LLC has employees, you must also periodically remit state withholding taxes deducted from their salaries. Additionally, you must contribute to the state’s unemployment insurance tax fund, supporting employees who have lost their jobs through no fault of their own. The exact tax remittances depend on employee headcount and salary figures.
- Corporate tax: LLC owners in New Mexico also have the option to choose to have their business taxed as an S corporation, which can provide tax benefits for profitable companies. By electing this option, LLC owners can take advantage of lower corporate tax rates than personal income tax rates. To have an LLC taxed as a corporation, the owner must file Form 2553 with the IRS. Subsequently, you must file a New Mexico Corporate Income and Franchise Tax return, available on the state’s Forms & Publications page. The state imposes a 4.8% tax rate of up to $500,000 on corporate income. For corporate income exceeding $500,000, there is a base tax of $24,000 for the first $500,000, plus an additional 5.9% on every dollar above that amount.
- No annual report: New Mexico distinguishes itself as a state that does not require LLCs to file annual reports.
8. Create an Operating Agreement
LLC operating agreements are essential for governing a company and establishing clear guidelines for its owners. Although not mandatory in New Mexico, most LLCs create an operating agreement to ensure smooth company governance. A typical LLC operating agreement includes the following:
- LLC name and any “doing business as” (DBA) names
- Business address, email address, and phone contact information of the LLC
- Name and address of the registered agent representing the LLC
- Planned lifespan of the LLC, whether temporary or continuous perpetuity
- Purpose and scope of the LLC’s business activities
- List of LLC members and their ownership percentages
- Statement outlining the duties and responsibilities of all LLC members
- Disbursement models for distributing company profits and allocating losses
- Guidelines for admitting new members to the LLC and removing existing members
- A numbered list of business decisions that require a membership vote with specific voting procedures
- Company policies regarding member indemnification and liability
Operating agreements provide a framework for managing an LLC effectively and help prevent member disputes by clearly defining their rights and obligations.
9. Check Business Insurance in New Mexico
Opting for an LLC business structure offers a crucial shield for your personal assets if your company faces legal action. However, it’s important to ensure that your LLC also has the necessary safeguards in place. This is where insurance policies come into play, providing essential coverage for your day-to-day business operations.
In New Mexico, certain types of insurance are mandated by law, such as workers’ compensation and automobile insurance. Additionally, while not legally required, other policies may be necessary as a condition for renting property or securing a loan. Common examples of these business insurance policies include:
- Workers’ compensation insurance: This coverage protects your employees by providing financial support for work-related injuries or illnesses.
- Professional liability insurance: This policy safeguards professionals against claims of negligence and errors arising from their professional services.
- Commercial auto insurance: If the company uses vehicles for its operations, it covers accidents, damage, or theft involving those vehicles.
- Commercial general liability insurance: This policy offers broad protection by covering various liabilities, including property damage, bodily injury, and advertising injury claims.
10. Fulfill Annual Obligations
New Mexico LLCs do not need to submit annual reports. However, depending on your business and if you have employees, you may need to pay yearly taxes or file quarterly reports. For instance, if you sell goods in the state, you must pay a gross receipts tax annually. If you have employees, wage or non-wage withholding taxes are necessary. Selling alcohol or cigarettes may require application in a special tax program. There is no annual fee for New Mexico LLCs, only the taxes associated with conducting business in the state.
If you are a licensed professional or employ licensed professionals, ensure that your business licenses remain up-to-date. New Mexico does not recognize PLLCs as separate entities, so forming an LLC with professionals follows the same process as in any other industry.
Promptly update the state if you change your business, such as adding or removing members, changing your registered agent, or updating contact information. Failing to update your information could lead to penalties if you miss crucial correspondence.
11. Market Your New Mexico LLC
After completing the necessary legal filings, setting up a bank account, and obtaining the required insurance for your New Mexico LLC, it’s time to focus on marketing and building your brand. This involves creating slogans, taglines, color schemes, fonts, and logos and cultivating a consistent marketing voice. When it comes to marketing for small businesses, consider the following paths:
- TV and radio ads: Traditional advertising methods that expose your company to a wide audience. New Mexico’s largest media market is centered around the Albuquerque/Santa Fe region, making it a primary target for TV and radio efforts.
- Pay-per-click web ads: These targeted online ads appear on web pages, social media, and online videos. Online platforms allow you to tailor ads based on geographic location, demographics, interests, and search history.
- Social media influencer campaigns: Partnering with influencers or online celebrities who promote your products through reviews, discounts, and codes. This connects you with their large social media followings.
- Store displays: Showcasing your products at the point of purchase can be a powerful marketing tool. Allocating a portion of your budget towards in-store displays, demo booths, and sales representatives can attract customers.
Are you ready to start your LLC? Start New Mexico LLC now.
LLC State Guides
FAQs About How To Start an LLC in New Mexico
The filing fee for LLC formation in New Mexico is $50, which is affordable compared to other states. Additionally, there may be an annual report fee based on the LLC’s income.
No, you don’t have to live in New Mexico to start an LLC. Non-resident business owners have two options: either start a New Mexico LLC with someone physically present in the state or register a foreign LLC in New Mexico.
New Mexico is considered a business-friendly state with room for growth. However, it is important to weigh the advantages and disadvantages of your business needs.
Pros: Low initial filing fees, no franchise tax on LLCs, and limited liability protection for personal assets.
Cons: Obligation to file an annual report and pay associated fees, and the relatively small population potentially limiting market size and growth potential.
The LLC structure offers simplicity, tax flexibility, and personal asset protection. It is a preferred choice over sole proprietorship or limited company structures. However, depending on your circumstances, establishing your business as a corporation may offer financial flexibility and personal liability protection, albeit with stricter tax reporting and governance rules.
