How to Start an LLC in New Mexico

New Mexico is stunning and has numerous state and federal parks that can set a wild heart free. It also has a thriving business community that runs the gamut from hospitality and tourism to the sciences. Data shows there are more than 154,000 small businesses in the western state. They employ 53.3% of all the state’s workers and makeup 99% of all businesses. Additionally, 54% of businesses in New Mexico are owned by minorities. That’s 85,000 businesses. Industries that are abundant in New Mexico include professional, scientific, and technical services, construction, healthcare, and social assistance. The federal government is prominent in the state so those who want to offer support services would likely do well.

There are many things to do to start a business. Here’s how to work through LLC formation in New Mexico:

The first step in forming an LLC in New Mexico is to select a name for your company. New Mexico has standards in name selection with the priority being that it must be unique. In other words, the name you pick can’t be the same as that of another business in the state and can’t be too similar.

Check name availability

A simple way to find out if your desired name is unique and distinctive from other businesses in New Mexico is to search for it online with the state name search tool found on the New Mexico Secretary of State’s portal. It’s a free tool that’s easy to use. 

All you do to search is enter your proposed business name and search. A list of businesses with similar names will be generated and you can see if your name is distinctive. Name availability may be a challenge, so be prepared to generate a new name. 

Consider what makes a name memorable

What makes a good name? You want it to clearly indicate what the business does but be creative and something that people will remember. 

Some people play on cliches and usually, that works well if it’s clever. For instance, one restaurant named itself Hugs and Quiches while another has the name Hogs and Kisses. A car wash shop in another state calls itself A Wash to the Wise. 

Of course, you don’t have to play on a cliche. Regardless, your name should be descriptive, easy to say, and simple to spell. Abbreviations aren’t a good idea either, since they’re hard to recall. 

The company name should also match its domain name online. Before registering your business with the state, check into domain name availability too, to make sure you’ll offer a consistent experience to customers. 

To start an LLC in New Mexico, you need to select someone to be your registered agent. The state requires that someone be appointed to represent your business in accepting legal documents, like service of process, and other official documents. 

New Mexico has rules about those becoming registered agents. They include:

A business owner can serve as their own registered agent. They can also appoint a trusted friend, a family member, another LLC member, or an employee to the task. However, some may find this stressful and prefer to hire a professional company to serve as a registered agent.

Three larger companies that can do business in New Mexico as registered agents are Northwest Registered Agent, ZenBusiness, and Bizee.

These types of businesses can also take care of the entire process of becoming a company for you including registering with the state, getting your EIN, and filing with the state revenue department.

We recommend:

Visit ZenBusiness

Pros

• Solid customer support
• Long track-record of reliability
• Large company with lots of resources

Cons

• Hard to find refund and cancellation policy

Visit Northwest

Pros

• Industry experience
• Stellar customer reviews
• Personalized support
• Volume discounts

Cons

• Fewer add-on services than some competitors
• State fees charged separately (industry standard)

Visit Bizee

Pros

• Excellent value for money
• Quality services
• Good customer reviews
• No hidden charges
• Live chat support

Cons

• A lot of upsells in the signup process

The next step to forming an LLC in New Mexico is to file Articles of Organization. This can be done online and only takes a few minutes once you have your information together. However, you must create an account or log into the Secretary of State business services to access forms and file online.

Articles of Organization in New Mexico seeks basic information about the business including:

Like hiring a professional registered agent, you can also hire a business service company to take care of things like filing Articles of Organization for you. Many of the same companies that offer registered agent services also offer other business services like business formation.

Filing fee 

The filing fee for filing Articles of Organization to create an LLC in New Mexico is $50.

New Mexico processing time 

It only takes New Mexico officials one to three business days to process Articles of Organization.

New Mexico doesn’t mandate that businesses have an operating agreement. However, creating an operating agreement for your LLC is still a good idea because it shields the business from unnecessary state laws and interference. It also sets a good foundation for how to manage the LLC daily.

Creating an operating agreement allows LLC members to communicate and plan for unexpected events like a death of a member or a severe economic downturn that should shudder the business. 

 An operating agreement should be highly detailed and include elements like: 

One of the more cumbersome things about running a business is setting up your tax information. You will need to deal with both the federal government as well as the state revenue department. You may also need to work with the labor department to set up your business for employees.

Almost all businesses beyond sole proprietorships must have an employer identification number (EIN). It’s a number the Internal Revenue Service uses to identify your business. You will need this number mostly for taxes, but you’ll also need it to open a bank account, manage payroll taxes, or get a loan.

Think of an EIN as a social security number for your business. It’s mostly needed for LLC tax purposes.

You can apply online with the IRS to get an EIN. It’s a simple process to get an EIN because you can file for it online and receive it immediately. The IRS will ask some questions such as the type of business entity you have, the industry your business will work in, and the LLC owner’s name. That is much of the same information you’ve already provided to the state for registration. 

A new business in New Mexico must also file the entity with the Taxation and Revenue Department. You will receive a state number there that is also used by the Labor Department to pay the unemployment tax. This can be done online or you can schedule an appointment if you have questions.

Part of the process of starting a business is to open a business bank account under the business name. A checking account is necessary to make check deposits, get money from payment processors, and apply for loans. It is also a good idea to have a savings account and business credit cards.

It’s an important routine to keep business finances separate from personal money. The main reason is auditing. The IRS and the state taxation department see intermingling money as a violation. 

Keeping business money and expenses separated also makes it easier to manage and be accountable for expenses.

As an LLC, you’ll pay federal taxes and state taxes on your personal tax returns. LLCs are pass-through tax entities with personal liability protection. These business structures make it fairly easy to file taxes. 

New Mexico has a graduated corporate income tax rate that starts at 4.8% and tops out at 7.6%. Businesses that make under $500,000 in revenue get the lowest percentage. Those who bring in more than $500,000 in gross taxable income will pay 6.4% and those businesses that earn more than $1 million or more yearly will pay the top percentage.

Sales tax in New Mexico

The state also has a 5% sales tax and local entities can charge a maximum local sales tax of 4.313%. New Mexico has an average combined sales tax rate of 7.84%. It falls in the middle nationwide regarding sales tax as it ranks 28th overall for 2022 in the Tax Foundation Business Tax Climate Index.

The state exempts two things from its sales tax. That is general occasional sales and motor vehicles. General occasional sales would be things sold online as a hobby or yard sales. 

The state also offers a tax-free holiday every November to support Small Business Saturday.

Tax incentives

The state and local cities have tax incentives for businesses wanting to establish there. There is the New Markets Tax Credit Program for investors. It offers a 39% federal income tax credit that’s earned over seven years to those who invest in a qualified low-income community enterprise.

The City of Santa Fe has tax incentives for qualifying businesses that employ students that are enrolled full-time in a New Mexico secondary school The Albuquerque Regional Economic Alliance offers a manufacturing tax credit. Qualifying businesses get a credit equal to 4.875% of the value of property and equipment that qualifies.

The state also offers a 10% corporate tax credit for businesses paying employees higher wages and benefits. The credit is good for those who pay employees at least $28,000 yearly.

New Mexico requires reports to update information filed on your Articles of Organization. These can be filed either annually or biannually. They must be filed four months and 15 days after the close of your fiscal year. 

For those who end their fiscal year with the calendar year, the date would be May 15. For those who end their fiscal year at the end of June, the date would be Nov. 15.

If you file your annual report on time, you’ll keep your business in good standing with the state.

In other states, an annual report is called a Statement of Information.

Those going into business should consider the various types of insurance needed to keep the business and its LLC safe. New Mexico doesn’t have a lot of mandates requiring startups to carry all types of insurance. It only requires businesses to have worker’s compensation insurance to cover employee injuries if they are ever hurt on the job. 

The state also requires auto insurance and any business that will have company-owned vehicles will need to at least meet the minimum liability requirements on all its fleets.

Businesses would do well to carry other types of insurance such as liability, property and equipment damage, and, in some cases, flood insurance.

Liability insurance protects the business in case a customer ever tries to sue for injuries caused by the business or damage done to their property by the work your LLC performs. It’s relatively inexpensive and many companies offer it. 

Property and equipment insurance covers expenses of rebuilding and replacing if the building housing your business is ever damaged in a storm or fire. Flood insurance may be needed for those along a river or in a flood plain.

Insurances like health and life insurance are great options to offer to LLC members and employees but they aren’t necessary as they are benefits.

Additional resources to help you set up a business in New Mexico

Many resources are available through the New Mexico State Government, non-profit groups, and other entities to help you become a successful entrepreneur in New Mexico. Below are some that include: