How to form an LLC in New Mexico
With low filing fees, no annual reporting requirements, and enhanced privacy protections, New Mexico is an attractive choice for a limited liability company’s (LLC) home state. If you’ve started or are considering starting the process but are discouraged by the intricacies of the LLC formation process, don’t be.
Keep reading as we break down the process into smaller and easy-to-understand steps.
Starting a New Mexico LLC: Key Takeaways
- New Mexico LLCs offer a blend of limited liability protection and privacy.
- New Mexico allows non-residents to easily form LLCs, expanding opportunities for global entrepreneurs.
- You can use Business Incorporation Services from Block Advisors to help your LLC formation go smoothly.
An LLC is a popular business structure characterized by some of the best qualities of other business structures. It has the flexibility and relative ease of a sole proprietorship or partnership and the potential for limited liability protection similar to that of a corporation. This means that LLC owners may be protected from personal liability for the LLC’s debts – hence the name.
LLC owners are known as “members.” The number of members determines the management structure of the business entity. New Mexico recognizes the following LLC types based on the number of members:
- A single-member LLC: There is only one LLC owner who makes all the decisions (member-managed) or appoints an individual to run the business (manager-managed).
- A multi-member LLC: There are multiple members of the LLC. All members can participate in decision-making (member-managed) or appoint an individual to run the business (manager-managed).
The business formation process follows the same steps, regardless of your chosen LLC type. The same generally goes for taxation. Learn more about LLC taxation options.
New Mexico LLCs can choose how they’re taxed for federal tax purposes. In New Mexico, LLCs are generally taxed similarly for state and federal tax purposes. However, New Mexico LLCs taxed as an S corporation or C corporation may be subject to New Mexico franchise taxes.
New Mexico is the state of choice for LLC formation for many entrepreneurs. Below are a few advantages that make it an attractive option. Keep in mind that some of these benefits only apply to domestic LLCs.
Like in other states, when you form an LLC in New Mexico, you have the ability to separate your personal assets from your business assets. It does take some action on your part, however. For example, you’ll need to shift anything tied to the business currently in your name, such as business assets and accounts, over to the LLC.
But taking the right actions helps protect your personal assets if your LLC takes on debt or needs to pay out legal claims. This protection extends to all members, regardless of the LLC type. If the LLC gets sued, its debts and legal obligations generally can’t be satisfied using the members’ personal assets, like homes, cars, and bank accounts. There are situations where your personal assets could be at risk, such as if you personally guarantee the business’ debt or if you act fraudulently.
New Mexico is one of four “anonymous LLC” states, alongside Nevada, Wyoming, and Delaware. These states offer LLC owners significantly stronger privacy protection than other states.
Essentially, New Mexico LLC members can remain 100% anonymous. Members aren’t required to include their names in public records, even in the case of single-member LLCs. This is one of the highest levels of privacy an LLC member can have.
LLCs are already quite convenient for business owners who want to avoid the hassle of complex taxes due to their pass-through taxation model. However, New Mexico makes it even easier to file taxes, as the state honors all the federal tax structures of your LLC. This makes state income taxes consistent with their federal counterparts. As mentioned above, New Mexico LLCs taxed as an S corporation or C corporation may be subject to additional New Mexico franchise taxes.
Unlike most states, New Mexico doesn’t require you to file an annual report or pay annual fees to the New Mexico Secretary of State. This significantly simplifies maintaining your LLC’s administrative and financial aspects, reducing the risk of falling out of good standing.
Ready to form your New Mexico LLC?
The exact steps for forming an LLC will vary from state to state. In New Mexico, this process involves choosing a unique business name, designating a registered agent, penning an operating agreement, and filing the Articles of Organization. However, there are a few other aspects to consider after the official filing. Let’s look at each step in more detail.
Choosing a unique business name is a universal requirement for LLC formation. “Unique” means that an LLC name should not be used by an existing New Mexico LLC or be “confusingly similar” to another business’s name.
But uniqueness isn’t all you should consider when creating your ideal name. You should also consider New Mexico’s naming requirements. Luckily, there aren’t many of them, so you’ll still have room to get creative.
Here are some of the most critical requirements to consider:
- Your LLC name must include a phrase or abbreviation identifying your business as an LLC (e.g., limited liability company, limited company, LTD, or LLC).
- Your LLC name shouldn’t include restricted words (e.g., bank, trust, and insurance).
- Your LLC name shouldn’t imply government affiliation or endorsement (e.g., municipal, state, and federal).
You should do a business name search. This will allow you to quickly check whether your desired business name or DBA (doing business as) is available. If the results are favorable, proceed with the LLC formation as soon as possible to ensure no one snags your name. You can make a name reservation if you can’t form your LLC immediately but want to save the name.
When you file Articles of Organization to the New Mexico Secretary of State, and the document is approved, your LLC is officially legally recognized. This step is arguably the most important in the LLC registration process.
For this reason, filling out the form carefully and accurately is of utmost importance. Among other things, your Articles of Organization should contain the following information:
- The LLC name
- The LLC’s physical address
- The information about your registered agent
- Management structure details
- Contact information
Filing this legal document costs $50; you can file online via the Secretary of State’s website.
The law requires you to have a New Mexico registered agent to operate an LLC in the state. Designating this agent early on is vital, as you must include their contact information in your New Mexico Articles of Organization.
For a person or organization to be eligible as a New Mexico registered agent, they must meet the following criteria:
- They maintain a physical place of business in New Mexico.
- They’re available during business hours.
- They forward the mail they receive to the recipient LLC promptly.
The mail in question is any important legal notice intended for your business. Receiving and responding to this mail promptly is crucial in time-sensitive events, such as service of process for lawsuits or correspondence from the New Mexico Secretary of State.
You can be your own registered agent if your company is physically located in New Mexico. Simply use your company’s street address as the registered office if your company is physically located in New Mexico. However, it ties you to that office during business hours. Another option is to choose a third-party registered agent to conduct this service for you. If you decide to form your business with Block Advisors, you can appoint a registered agent service during the ordering process.
An operating agreement isn’t mandatory in New Mexico. Still, drafting one will help spare you potential conflicts and misunderstandings. Plus, without this document, your LLC will be governed by default rules under state law.
When it comes to the content of this document, many templates are available online which you can customize to fit your specific needs. An operating agreement includes several pieces of information, but the following items are typically required:
- Member voting rules and regulations
- Transfer of ownership procedures
- Profit and loss sharing
- Business dissolving requirements
- Member and manager (if applicable) obligations and rights
Even if you run a single-member LLC, you can benefit from drafting an operating agreement. Why? Because this document serves as additional proof that your business is legitimate. Future business partners, potential investors, or vendors may ask to see it before engaging with your LLC.
Obtaining an Employer Identification Number (EIN) is usually done after registering your LLC. Still, it’s a crucial step for operating your business smoothly for federal tax purposes and other things. Block Advisors can help you secure an EIN for your company when you register it using our Business Incorporation Service.
An EIN is like a social security number but for your business. You can receive this nine-digit number from the Internal Revenue Service (IRS).
Once you do, you’ll use it for several things, including opening a business bank account, filing taxes, hiring employees, and various financial transactions on behalf of your LLC.
Most U.S. states require submitting annual reports and paying a fee for your LLC to remain in good standing. New Mexico isn’t among these states. You’ll have almost no annual reporting requirements to maintain your LLC.
In this case, you should only be worried about paying your taxes and renewing the necessary business licenses and permits. Certain cities in New Mexico require general business licenses. This will help contribute to the legitimacy of your business.
As far as taxes go, there are three categories to keep in mind:
- State business tax: reserved for LLCs not operating as pass-through entities
- Franchise tax: reserved for LLCs with corporate tax status
- State employment taxes: reserved for LLCs with employees
- Sales and use taxes: reserved for specific businesses that sell goods and services in New Mexico
It can feel like forming a New Mexico LLC is no easy task, especially for new small business owners. While you navigate your options, be sure to consider the needs of your business and personal situation. Don’t forget that laws can vary from state to state. You may want to seek the advice of an attorney to evaluate all relevant considerations for your situation. The New Mexico Secretary of State’s website also provides numerous resources for small business owners that may help you understand the rules and requirements and how they apply to your situation.
Fortunately, you don’t have to go through this process alone. Work with Block Advisors Business Incorporation Service and transform this process into a stress-free experience. You provide some basic information and let us take care of the rest. In under 10 minutes, you’ll be on your way to having a properly formed and compliant New Mexico LLC.
This article is for informational purposes only and should not be construed as legal advice or a substitute for legal advice. Laws vary from state to state. You may want to seek the advice of an attorney to evaluate all relevant considerations.
About the Author
Carl Breedlove is a lead tax research analyst at the Tax Institute. He specializes in business, rental property, and state taxation. Carl is a University of Missouri-Kansas City School of Law graduate with a JD and an LLM in tax.
New Mexico LLC – FAQs
If you’re a resident, it costs $50 to form an LLC in New Mexico. The LLC filing fee rises to $100 if you’re not a resident.
Many small business owners consider New Mexico among the best U.S. states to form an LLC. It offers limited liability protection and privacy protection and requires no tedious annual report filings. Plus, the state fees for LLC formation are among the lowest. However, most of these benefits apply only to domestic LLCs.
Forming an LLC in New Mexico has numerous benefits, including potential personal asset protection, enhanced privacy protection, and minimal reporting requirements.
One of the most significant disadvantages of forming an LLC in New Mexico is that you may have to pay a franchise tax. However, this only applies to LLCs that decide to be taxed as a S Corporation or C Corporation.
Yes, an LLC formed in New Mexico pays taxes. Depending on the type of business, you might need to pay state business taxes, state employer taxes, and sales and use taxes.
The processing time for LLC approval in New Mexico can vary. If you submit the request online, it typically takes three to ten business days to get your LLC approved. Processing may take up to 30 business days if you mail it in.
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