How to form an LLC in New Mexico in 5 easy steps
If you are starting a business in New Mexico, first of all, congratulations! Second, you may want to set up your new entrepreneurial venture as a Limited Liability Company (LLC). This business ownership structure separates your business assets from your personal assets. The great thing about an LLC is if you accrue debt, your home, car, and personal bank account will be protected. It is a relatively hassle-free structure with less paperwork and fewer headaches in the long run.
Forming an LLC in New Mexico is fairly straightforward, but it is important to note that you will need to appoint a registered agent to process the LLC. This agent is an individual or business entity that agrees to accept legal documents on behalf of an LLC if legal action is pursued. The registered agent service must be New Mexico-based or a business entity authorized to do business in New Mexico. If need be, a business owner can serve as their own registered agent. Once this agent is established, there are 5 more steps in the process to get your business off the ground and running smoothly.
1) Check if your business name is available
One of the most important parts of forming a New Mexico LLC is the LLC name. This is how you are distinguished from your competitors. An LLC name can be time-consuming to change, however, so make sure it is something that will stick!
First, you will need to conduct a business name search on the New Mexico Secretary of State website. It is recommended that you type your desired business name in full and a few relevant keywords to see if there are companies with similar names. It is important to note that your New Mexico LLC must contain “Limited Liability Company,” “Limited Company,” or the abbreviations “LLC,” “L.L.C.,” “LC,” or “L.C.” The terms “Limited” and “Company” can be abbreviated as “ltd” and “co” if necessary, as well.
If your heart isn’t set on a name, not a problem! You can file for a name reservation. You can reserve the business name you choose for up to 120 business days once an Application for Reservation of Limited Liability Company Names and a Document Delivery Form is mailed to the New Mexico Secretary of State.
2) Claim your name
Once you are ready to move forward with your desired business name, you must file Articles of Organization. Keep in mind, Name Reservation will not be required if you are filing for this. There is a $50 filing fee for the Articles of Organization, and if you are filing the LLC online, there will be an additional fee on top of the $50—nothing crazy, typically a few dollars.
The Articles of Organization form will require some key pieces of business and contact information, including the business name, name and signature of the individual filing, signed consent of a New Mexico registered agent, a business or mailing address, and a phone number.
If you are a sole proprietorship and want to formally claim a Doing Business As (DBA) name, you will not be able to do so. New Mexico does not have requirements for, nor does it permit a DBA or trade name registration. Using either as a business in the state could have legal implications, and no one wants that.
Finally, if you already have an established LLC in another state and want to expand into New Mexico, you must form a foreign LLC. If you are transacting business (collecting state sales tax) in New Mexico, you must register for a foreign LLC. Some business activities are not recognized as “transacting business,” however. These include: having an agency handling securities, selling through independent contractors, and collecting debts.
3) Write the LLC Operating Agreement
Not all states require LLC owners to develop an Operating Agreement. While New Mexico is one of those states, that doesn’t mean you shouldn’t have one in place anyway. Operating Agreements give your business more legal credibility and will help your organization adhere to a set of rules and visions. It’s a nice-to-have that will give your business more security, so why not?
Your Operating Agreement should address the following points:
- Organization: Date of LLC formation, list of members, and details on how the ownership is divided. Make sure to add what type of business formation you are—there are single-member LLCs, General Partnership LLCs, and multi-member LLCs, to name a few.
- Distributions: How profits and losses will be distributed amongst members.
- Management and Voting Power: Who will manage the LLC, and how members will vote on key business decisions.
- Dissolution: An outline of how the business will be dissolved should members decide not to conduct business.
There are a variety of templates available online to help you plan and write your Operating Agreement. However, one thing you must include is how you want your LLC to be managed. Additionally, make sure to express in clear terms that you are free from any personal liability in the event of a lawsuit. You don’t want your startup to have a mounting pile of legal fees.
4) Pay your taxes
A New Mexico business will be required to register with the New Mexico Taxation and Revenue Department (TRD). Additionally, all LLC owners must obtain a Combined Reporting System (CRS) identification number. A CRS identification number is used to report and pay tax on receipts from business conducted.
Your next step may be getting a tax identification number. More specifically, an Employer Identification Number (EIN). This is so your employees can pay income tax. However, the only time an Employer Identification Number (EIN) is required is when an LLC has employees. If you are a single-member LLC with no employees, you will not need an EIN. You can obtain an EIN through the IRS website.
It is important to note that each member of the LLC will be required to pay a self-employment tax. The current rate for this in New Mexico is 15.3%. If you are the only employee, your income tax rate in the state will range from 1.7% to 4.9%—depending on which income bracket you belong to.
5) Wrap up other regulation and sales tax requirements
Depending on the industry you’re operating in and the location of your company, you may need to take some additional steps, such as obtaining business licenses or a sales tax license. It may not also hurt to obtain a Good Standing and Status Certificate. There’s a $25 filing fee, and you can obtain this certificate through the Secretary of State.
One of the many benefits of doing business as an LLC in New Mexico is that you do not have to file an annual report. Many states, such as Colorado, do require this. The only organizations that must file annual or biennial reports are corporations and nonprofits. So, if you are an incorporated LLC, you will need to file an annual report.
If your business is a corporation—either an S corporation or a C corporation—you must pay a franchise tax. This is only filed if you pay federal income tax, and the filing fee is $50. One benefit to being an S-corp or C-Corp is “pass through” treatment. This is when profits are taxed once on each LLC member’s income tax return. Additionally, as a pass-through business owner, you may be able to deduct 20% of your business income thanks to the Tax Cuts and Jobs Act. Sweet deal, right?
Get LLC insurance in minutes by following these steps
After forming your LLC, it’s time to protect it with LLC insurance. Huckleberry offers several options, making it easier than ever to get the coverage you need.
Here’s how to get started:
- Visit Huckleberry.com and click on the “Instant Estimate” button. In just minutes, you can get quotes for various insurance coverage types.
- Type in your industry so Huckleberry knows what insurance coverages are right for you.
- Answer a few questions about your LLC, including payroll estimates, revenue projections, and more.
In less time than it takes to go on a hot air balloon ride over Albuquerque, Huckleberry will provide you with quotes for multiple small business insurance options.
Check out our quick rate estimator for a ballpark figure of what you’d pay for business insurance. In need of workers’ comp coverage? Use our workers’ comp calculator to get a free, no-commitment cost estimate.
Establishing a New Mexico LLC isn’t too tedious, but it does require you to complete some important forms and pay some state fees. You likely chose to establish your business as an LLC for its liability protection, so it’s smart to continue to protect your valuable new venture with small business insurance. It is an appealing business structure that can offer great protection and flexibility to busy entrepreneurs. Hopefully, we have answered all of your burning FAQs, and we wish you all the luck in the world as you embark on this next chapter as a business owner!
Whether you’re looking to enroll in workers’ comp coverage online or you need a general liability policy for your company, Huckleberry can help. Many business owners can get a quote for coverage in 5 minutes! Now that your LLC is up and running, it’s time to offer yourself peace of mind and enroll in the small business insurance policy that works best for you and your needs.