How to Form an LLC in New Mexico: The Affordable Way

Author: Mathew Abraham

So you have a great business idea that you want to introduce into the market in New Mexico? Great! The first step would be for you to decide on a business structure.

A Limited Liability Company (“LLC”) can be an excellent choice for the business you are trying to form. It protects your personal assets, enjoys tax breaks, and provides operational flexibility.

New Mexico has a specific procedure you must follow to form an LLC. Making mistakes could result in you losing time, effort, and resources in the form of non-refundable fees.

Being informed before submitting documents and making payments would ensure this does not happen. Consider this article your friendly guide on how to set up an LLC in New Mexico.

Choose a Name for your New Mexico LLC

First impressions are important, so make sure you choose a name for your LLC that is creative and appeals to your prospective customers. A good name will help your LLC to have brand value in the market. It will also help the customers quickly identify your business from among the competition.

You are not entirely free to pick any name that you would like. New Mexico has several guidelines on how to name your business. 

Naming Guidelines

New Mexico’s Naming Guidelines outline the requirements your LLC’s name must meet while selecting the name of your business. 

The name of the LLC should be unique and must not resemble the name of any existing entity that has been registered with New Mexico.

The name of your business should have the words “limited liability company” or “limited company” or the abbreviation “L.L.C.,” “LLC,” “L.C.,” or “LC.”

Your LLC’s name cannot imply that it is affiliated with a government entity. For example, you cannot name your LLC “Fire Breathing Iguanas” and abbreviate it as “FBI.”

The participation of a licensed professional, such as a lawyer or a doctor, in your LLC may be required if you would like to use specific terms in your LLC’s name, like “bank,” “attorney,” etc.

Does Your Business Need a DBA? 

A DBA (doing business as) enables you to operate your LLC under a different name. It is also referred to as an “Alternate Business Entity Name.”

A DBA name is best used for branding purposes. But remember that the trade name alone does not protect your personal assets. To avail of the protection of limited liability, you need to form an LLC.

Effective July 1, 2021, the State has enacted a new law to register Alternate Business Entity Names. For any assistance as to how you can file an Alternate Business Entity Name, you can contact the office of the Secretary of State at 505-827-3600.

Doing a Name Search and Name Reservation

If you have a preferred name in your mind for your LLC, you need first to ensure that it is not similar to an existing business registered in New Mexico. You can use the State’s Business Entity Search for this purpose. If your LLC’s potential name does not bring up matching results, you are good to use the name to register your LLC.

In case you are not ready to incorporate your LLC immediately, you can reserve your chosen name. You must apply to the Secretary of the State to reserve your name.

Once the Secretary of State has reviewed the application, the name shall be reserved for 120 days. Presently, there are no options to apply online. Instead, you can send in your applications via mail.

RESERVE YOUR LLC’s NAME IN NEW MEXICO

Reserve a Name by Mail

Download form

Mail to:
325 Don Gaspar
Suite 300
Santa Fe, New Mexico 87501

Fax: (505) 827-8081

Fee: $20

Register a Business Domain Name

Everyone is taking their business online, given the global move towards digital. A domain name relevant to your LLC will make it easier to establish an online presence. You should check to see available domain names and register one you feel suits your business.

You can check currently available domain names.

Choose a Registered Agent in New Mexico

You must select a registered agent before your company can start functioning. A Registered Agent is an individual or another business entity responsible for receiving all official communications, such as federal and state government documents, tax filings, and legal notices on behalf of the LLC.

Laws in New Mexico require you to mandatorily appoint a registered agent.

Who Can Be a Registered Agent?

While appointing your registered agent, you need to keep in mind the laws of the State in this regard.

The agent you select for your LLC must be:

  • An individual State resident (above 18 years) or
  • A business entity that has obtained authorization to conduct business in the State. 

The registered agent should be available during business hours on all working days. You can appoint anyone as your LLC’s registered agent as long as they meet New Mexico’s requirements. You could appoint yourself, a friend, someone from your family, or even a member of your LLC. You may also hire a registered agent service.

Individual v. Registered Agent Service

Nothing is holding you back from appointing yourself as the registered agent for your LLC. However, you should hire a registered agent service as it has many advantages.

Missing deadlines or mishandling communications could be costly for your LLC. A registered commercial agent is a professional service that handles your LLC’s communications with the State. They ensure that you don’t fail to duly respond to any notice or other communication sent to your LLC.

The registered agent’s address is available for the public to access on the concerned websites. So if you work out of your home or a private office, having a professional registered agent service will help you maintain privacy.

A registered agent service helps you focus your energy and time on growing your business. Also, if you are your agent, you risk receiving sensitive documents like notice of a lawsuit in front of your employees or clients. Having a professional registered agent service helps you handle the situation discreetly.

File Article of Organization with New Mexico

In New Mexico, you must file a legal document called the Articles of Organization to form and legally incorporate your LLC. It is to be filed with the office of the Secretary of State. Once this is completed, your LLC is registered and is recognized in the eyes of the law. 

The Articles of Organization clearly state the following information:

  • Name of your LLC
  • Registered Office’s Address and business address if it differs from the address of the registered office
  • Effective Date and Duration
  • Business Purpose
  • Registered Agent Name and Registered Office Address
  • Governing Authority Type
  • Organizer Information

You can file the Article of Organization online, using the Domestic (NM) LLC Formation portal of the Secretary of State’s website. Currently, there is no option to file the document via mail. You must also upload a copy of the Statement of Acceptance form, duly signed.

FILE ARTICLES OF ORGANIZATION WITH NEW MEXICO

Option 1: File Articles of Organization Online

File online

Fee: $50

Expedited Filing

New Mexico does not currently offer any expedited processing services for LLC formation.

Publish Notice of Formation

Publishing notices of formations are not mandated in the state of New Mexico.

Create an Operating Agreement for your New Mexico LLC

An operating agreement is an internal document that outlines the LLC’s ownership and management provisions. It also provides a framework concerning the duties of members of the LLC and its managers. It acts as a guiding force in matters of the day-to-day functioning of the LLC. 

In New Mexico, LLCs do not need to have an Operating Agreement as a matter of law. However, it is prudent for you to have one drafted. You will need an operating agreement for opening an account with the bank. It offers credibility to your enterprise. More importantly, it helps protect the LLC’s limited liability status by reinforcing it. It also helps avoid disputes and misunderstandings in matters relating to the management of your LLC.

Your operating agreement should cover the following matters:

  • Organization Details 
  • Ownership 
  • Duties of Members and Managers
  • Management and Voting 
  • Capital Contributions
  • Division of Profit and Losses
  • Bookkeeping Procedures
  • Procedure for adding new members
  • Requirements concerning Meetings and Procedures thereof
  • Dissolution

Remember, the above provisions are only illustrative. You are free to draft an operating agreement that suits your need.

Writing an Operating Agreement Yourself v. Hiring a Service

It is crucial to draft an operating agreement properly as it governs the relationship between different employees and members of your LLC. You can create your operating agreement, or you can purchase templates that you can customize to draft the operating agreement of your LLC.

If you feel your LLC needs a complex or intricate operating agreement, you can always hire an attorney to draft it for you. Most registered agent services also offer services to draft operating agreements.

Limitations of an Operating Agreement

There is no fixed format for this agreement. You have all the freedom to include the terms of the agreement you feel are necessary for your LLC. However, an operating agreement does not exclude you, or members and employees of your LLC, from the laws of New Mexico.

Therefore, make sure that your operating agreement does not contain any provisions that are prohibited by the laws of the State. Being experts in the laws of New Mexico, attorneys or professionals will help you draft an operating agreement that suits the needs specific to your business model.

Obtaining an EIN for your New Mexico LLC

EIN (Employer Identification Number or Federal Identification Numbers or FEINs) is the tax identification number for your LLC. Businesses are given EINs by the Internal Revenue Service (IRS) to identify them for taxation purposes. You can think of it as your company’s Social Security Number. It is a must-have for every firm that intends to engage employees.

You will need an EIN to open a bank account, file tax returns, and hire employees. The IRS issues an EIN, and you can apply for it online or through the mail.

GET AN EIN

Option 1: Request an EIN from the IRS

Apply online – OR –

Option 2: Apply for an EIN by Mail or Fax

Download form

Mail to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999

Fax: (855) 641-6935

Fee: Free

File Annual Reports in New Mexico

An annual report is a document used by the authorities to get the latest and updated information about all the business entities operating in the State.

However, New Mexico does not require your LLC to file annual reports. Instead, your LLC is required to file an Income and Information Return for the Pass-Through Entities (PTE)

Tax Liability for Your New Mexico LLC

The way your LLC will be taxed depends upon the number of members in your LLC. There are four ways in which LLC will be taxed:

  • Sole-proprietorship: a business owned by a single person
  • Partnership: a business owned by multiple people
  • C – Corporation: income is split or segregated for taxation
  • S – Corporation: tax liability is split between the business and its owners

Federal Tax Liability 

You must pay Federal self-employment tax (presently 15.3%) on the profits you take from your LLC. You are eligible for certain deductions in the nature of business expenses. You are also liable to pay Federal Income Tax. The income tax you have to pay will vary depending on your income, filing status, deductions, etc.

To be taxed as a sole-proprietorship, you will report your LLC’s activities under Schedule C, Schedule E and/or Schedule F of Form 1040.

To be taxed as a partnership, you will, apart from filing Form 1040, file your partnership returns under Form 1065 and provide information under Schedule K-1 for each member. 

If you would like your LLC to be taxed like a C-Corp or S-Corp, you can do so by filing Form 8832 and Form 2553, respectively.

State Tax Liability

Newly formed LLCs in the State are expected to register with the Taxation and Revenue Department of New Mexico to obtain a CRS (Combined Reporting System) number. It is an identification number allotted to your LLC by the State for taxation purposes. You can register to obtain your CRS number online.

If you opt to treat your LLC as a corporation for taxation purposes, your LLC will be required to pay corporate income tax and a corporate franchise tax in New Mexico.

Additionally, if your LLC is engaged in selling certain physical products or specific services, you will be required to pay a Gross Receipts Tax (similar to Sales Tax). You must obtain a seller’s permit before collecting gross receipt taxes from the customers on taxable sales.

Miscellaneous Tax Liability

If you are an employer, you must register with the Department of Workforce Solutions for Unemployment Insurance Tax. In addition, you must also register for Employee Withholding Tax on behalf of your employees.

Permits & Licenses

You may be required to register for specific permits and licenses depending on the nature of your business and its location. Accordingly, your business will be subject to three licensing jurisdictions: Federal, State, and Local.

Federal Licensing requirements will depend on the business activity carried on by your LLC. If your company is engaged in any area of business regulated by the Federal Government, you will be required to obtain relevant Federal Licenses and Permits.

Some business activities requiring Federal Licenses and Permits are 

If your LLC is engaged in selling certain physical products or services at the State level, you will be required to obtain a seller’s permit for the State’s gross receipt taxation.

Additionally, certain professions in New Mexico are also expected to obtain specific licenses and permits. You can visit the New Mexico Taxation and Revenue Department website to get your seller’s permit.

Depending on where you operate your business, you may also be required to get the local government’s license and permit. In the city of Santa Fe, companies need to obtain a city business license. To know more about local licensing requirements, get in touch with the office of your city or county government office.

For more information regarding;

Business Bank Account & Phone Number

A business bank account would help secure your assets by separating them from LLC’s assets. It streamlines the process of filing taxes and keeping track of financial transactions. Your bank will ask for your LLC’s EIN.

It is always a good idea to provide customers and potential customers with a line of contact dedicated to them. A business phone number will give your LLC a means of owning its communications, independent of anyone else. Most network providers offer enterprise/business plans; pick the one best suited to your LLC.

Final Thoughts

New Mexico has one of the best pro-business regulatory setups. Small businesses in the State are supported with several incentives such as zero inventory tax, low energy costs, and affordable real estate.

Additionally, LLCs in the State are also provided several benefits, depending on the type of industry. Examples of such incentive programs include Rural Jobs Tax Credit, Consumables Gross Receipts Tax Deduction for Manufacturers, Opportunity Zone tax credits and other incentives, etc.

New Mexico does not mandate filing annual reports; unlike other states, your LLC is not at risk of involuntary dissolution due to late filings. On completing the above steps, your LLC is legally incorporated and ready to do business. We wish you and your LLC the best of luck!

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