New Mexico LLC: How To Set Up a New Mexico LLC in 11 Steps

New Mexico LLC

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With its wide-open vistas, favorable weather, affordable real estate, and competitive tax environment, New Mexico appeals to many entrepreneurs looking to start a business. Many of these entrepreneurs gravitate toward the LLC business structure, thanks to its personal asset protections and tax flexibility. Whether you use an LLC formation service or file all the forms yourself, establishing an LLC in the state of New Mexico is a straightforward process and the first big step in getting your new business venture off the ground.

What is an LLC?

An LLC, or limited liability company, is a formal business entity that is controlled by its ownership group. While corporations need a board of directors to oversee their business organization, LLCs can be managed from within. An LLC is owned by one or more individuals, known as LLC members.

A single-member LLC is an LLC with just one owner, while a multi-member LLCs has more than one owner. An LLC member can be a managing member, who actively participates in the company’s day-to-day operations, or a non-managing member, who holds an ownership stake without actively participating in daily operations. 

Is an LLC right for you?

The LLC structure combines simplicity, tax flexibility, and personal asset protection. This total package exceeds the benefits of a sole proprietorship or limited company. You can also establish your business as a corporation, which offers financial flexibility and personal liability protection. However, corporations must abide by strict rules for tax reporting and corporate governance, which makes them burdensome for some small-business owners. There are two main reasons to choose an LLC:

  • Personal liability protection. LLC owners do not have to risk their personal assets as a condition of LLC ownership. If their LLC goes bankrupt, lenders and tax agencies cannot chase the owners’ personal finances. If the LLC is sued, lawyers and litigants cannot target the LLC owners’ personal property. Business owners do not enjoy such protections with a sole proprietorship. 
  • Avoiding double taxation. Many large American businesses are corporations, but this popular business structure can be subject to double taxation. Owners get taxed on their income received from the company, while the company itself pays corporate taxes on its profits. LLCs, by contrast, receive “pass-through” status from the IRS. They pass their profits and losses down to their individual LLC members, who then report these balances on their personal returns. LLC members can use this pass-through structure to claim a personal income deduction if their LLC loses money in a tax year. Their deduction is proportional to their ownership of the LLC. For example, if the LLC loses $48,000 in a year, an LLC member with a one-third ownership stake can claim a $16,000 deduction on their income taxes.

1. Name your New Mexico LLC

You can choose two business names for your New Mexico LLC. The first is the LLC’s legal name, which you register with the state and the IRS. The second name can be a DBA (“doing business as”), which is a separate name under which your LLC does business. Shopify’s business name guidelines can steer you toward effective names for your company. Once you’ve settled on names, you must register them with the state of New Mexico. Here’s how:

  • Confirm you’ve picked an original name. Before registering an LLC name in New Mexico, do a corporate business search with the New Mexico Secretary of State. You’ll want to confirm that no other company has claimed your preferred name. Note that all New Mexico LLCs must include the phrase “Limited Liability Company” or its abbreviations (“LLC” or “L.L.C.”) in their business names.
  • Register your LLC name. Upon confirming the LLC’s name is unclaimed, you can reserve it by filing an Application for Reservation of a Domestic Limited Liability Company Name. The application has a $20 filing fee as of 2022.
  • Choose a DBA, if desired. New Mexico does not regulate DBAs or trade names. If you decide to operate your company using a DBA, it’s not required to report it to the state. However, you may encounter issues if another company also wants to use your DBA.
  • Reserve domain names and social media handles. Business owners want to make it easy for customers to find them online. Perhaps the best way to do this is to claim a domain name and social media handles that closely align with your LLC name or DBA. Tools like Shopify’s domain name generator can help in this process.

2. Create a business plan

You can use a business plan to help steer your company toward success, growth, and financial solvency. Most business plans contain a mission statement, core organizational goals, organizational hierarchies, workflow charts, core market analyses, projectable revenue streams, and objective measurements for success. 

Referencing a library of business plan examples can show you what real-world business plans look like and help in creating a plan. You can also use a free business plan template to help you draft a plan of your own.

3. Get an employer identification number (EIN)

Your New Mexico LLC needs a federal tax identification number, better known as an employer identification number, or EIN, which is a tax identifier for your business. You can get a free EIN from the IRS. Any individual or business entity that hires employees must have an EIN, and you need one to file taxes. You can also use your EIN to set up a business bank account for your LLC.

Once you have your federal EIN, you will register your LLC with the New Mexico Taxation and Revenue Department and file Form ACD-31015. This process authorizes you to conduct financial transactions in the state of New Mexico.

4. File New Mexico LLC Articles of Organization

To formally establish your New Mexico LLC, you will file Articles of Organization with the Secretary of State’s Business Services Division. For $50 (as of 2022), you can file online by visiting the Business Services page on the Secretary of State’s website and selecting to e-file Domestic (NM) Limited Liability Company formation.

If your LLC already exists in another state, New Mexico considers it a foreign LLC. To set up your foreign LLC for business in New Mexico, file the online Application for Registration (to conduct business in NM). This document costs $100 to file. Both formation documents will ask that you provide the following: 

  • LLC name
  • LLC’s purpose for existence
  • Name and address of at least one managing member
  • Physical street address, phone number, and email address
  • Name and address of the LLC’s registered agent
  • Names and addresses of all LLC owners

5. Choose a registered agent in New Mexico

Your New Mexico LLC must designate a registered agent who can accept legal documents and tax correspondence on behalf of the business. You can choose an LLC member to serve as your registered agent, provided they live in the state. If none of your members wish to serve as a registered agent, or if none have a physical address in the state, you can hire a professional registered agent service. You are required to provide your New Mexico registered agent when filing your LLC articles of organization.

6. Obtain a business license and permits

New Mexico requires licensing and permitting for companies to operate in particular industries. Examples include construction, architecture, food service, and alcohol sales. Some of these business licenses are issued at the state level while others are issued by a local government agency. The New Mexico Business Portal can link you to both state-level and local-level permitting offices.

7. Understand New Mexico state tax requirements

As a legal pass-through entity, your LLC will still pay federal taxes to the IRS, passing profits and losses through to its individual members. The LLC uses IRS Schedule K-1 to report these profits and losses to its members, who in turn report them to the IRS. In accordance with this tax status, New Mexico requires LLCs to file an annual Income and Information Return for Pass-Through Entities. You can do this online through the state’s Taxpayer Access Point (TAP). Other New Mexico state tax considerations include:

  • New Mexico sales tax. New Mexico’s state sales tax rate is 5%, and (as of 2022) localities can add up to 4.313% on top of that. Once your LLC is registered with the New Mexico Taxation and Revenue Department, you’ll be expected to collect and remit those sales taxes.
  • Employer taxes. If your New Mexico LLC has employees, you will periodically remit their state withholding taxes, which come out of their salaries. You are also required to pay into the state’s unemployment insurance tax fund, which is used to support employees who lost their jobs due to no fault of their own. Your exact tax remittances hinge upon employee headcount and employee salary figures.
  • Corporate tax. LLC owners may choose to have their company taxed as an S corporation, which can benefit profitable businesses. That’s because corporate tax rates are typically lower than personal income tax rates, and LLC owners pay taxes at the personal rate. To have your LLC taxed as a corporation, file Form 2553 with the IRS. You’ll then file a New Mexico Corporate Income and Franchise Tax return, found on the state’s Forms & Publications page. The state taxes corporate income up to $500,000 at a 4.8% rate. If your corporate income is above $500,000, you pay $24,000 for the first $500,000, plus 5.9% of every dollar above that amount.
  • No annual report. New Mexico is a rare state that does not make LLCs file annual reports.

8. Prepare an operating agreement

LLC operating agreements help company owners govern their business. These legal documents memorialize your membership group’s ownership shares and status within the company. While New Mexico doesn’t require its LLCs to have operating agreements, most companies choose to draft one as a guide for company governance. A standard LLC operating agreement includes: 

  • LLC name and its DBA (if applicable)
  • LLC business address, email address, and phone contact
  • Name and address of the LLC’s registered agent
  • Planned lifespan of the LLC (temporary or continued in perpetuity) 
  • LLC purpose and business scope
  • List of LLC members and their respective ownership percentage
  • Statement of duties and responsibilities for all LLC members
  • Disbursement models for company profits and losses
  • Regulations for admitting new LLC members and removing existing members
  • A numbered list of business decisions requiring a membership vote, along with specific voting procedures
  • Company policies on member indemnification and liability

9. Examine business insurance options in New Mexico

By choosing an LLC business structure, you protect your personal assets in the event your company is sued. While this covers personal assets and liability, your LLC will need protections of its own. This comes through insurance policies that provide coverage for day-to-day business.

New Mexico law mandates some types of insurance, like workers’ compensation insurance and automobile insurance. Other policies are legally optional but may be required as a condition of renting property or receiving a loan. Common types of business insurance policies include:

10. Understand financial considerations

Your new company will need to easily get cash, issue checks, deposit incoming checks, and receive payouts from payment providers. That’s where an LLC bank account comes into play. You can set up an account at either a bank or a credit union. Obtain a federal EIN before setting up your account.

New Mexico can connect you to funding, grants, and special tax benefits to get your LLC off the ground. Start your journey at the New Mexico Finance Authority or the Finance New Mexico web portal. You can explore federal resources via the US Small Business Administration. The SBA has a district office in Albuquerque that serves the entire state of New Mexico. One final but valuable resource: merchant support through services like Shopify Capital, which connects business owners to lenders and investors.

11. Market your LLC

Once you’ve filed legal documents for your New Mexico LLC, set up a bank account, and bought the applicable insurance policies, you can turn your focus toward marketing and brand-building. This involves auditioning slogans and taglines, color schemes, fonts, logos, and a unified marketing voice. When it comes to small business marketing, potential marketing paths include:

  • TV and radio ads. This traditional form of advertising exposes your company to a broad audience. New Mexico’s largest media market is concentrated in the Albuquerque/Santa Fe region, so most of your TV and radio efforts would be focused there.
  • Pay-per-click web ads. You can carefully target your audience with pay-per-click web ads that appear on web pages, social media feeds, and online videos. Online ad platforms let you target ads based on a user’s geographic location, demographics, interests, and search histories.
  • Social media influencer campaigns. You can pay influencers, or online celebrities, to promote one of your products, give it a review, and offer discount codes. This connects you to their legions of social media followers.
  • Store displays. For some marketers, showcasing products at the point of purchase is a powerful tool. A marketer may dedicate a chunk of their marketing budget toward in-store displays, demo booths, and sales reps.

Starting an LLC in New Mexico FAQ

How much does it cost to start and maintain an LLC in New Mexico?

The startup costs for a New Mexico LLC include $20 to reserve your LLC name, $50 to file articles of organization, and $100 to set up a foreign LLC for business in New Mexico.

What are the pros and cons of establishing your LLC in New Mexico?

New Mexico is known for its natural beauty, abundant land, and relatively affordable cost of living. Its top business tax rate of 5.9% is near the median of all states. The state’s 5% sales tax is near the national average, which is 5.09%. 

One drawback to New Mexico is its small population and poorly performing public education system. It lacks the abundant, well-trained workforce found in some neighboring states like Colorado. Outside of the Albuquerque/Santa Fe area, the state is very sparsely populated, which may limit business opportunities.

Do you need a registered agent for your LLC in New Mexico?

Yes. All New Mexico LLCs are required to designate a registered agent with a physical address in the state. An LLC member can be that registered agent. You also can hire a professional registered agent service.

How do state taxes work for LLCs in New Mexico?

Traditionally, LLCs let income pass through the company to individual members. Those members receive IRS Schedule K-1, which lists their LLC-related profits or losses. They report these profits or losses on their personal federal income tax filing. Such companies pay an annual pass-through entity tax of $50 to the New Mexico state government. If you have your LLC taxed as an S corporation, your company income gets taxed at New Mexico corporate tax rates, which range between 4.8% and 5.9% depending on your total company revenue. New Mexico LLCs must pay unemployment insurance tax on behalf of all their employees. Companies must also collect and remit New Mexico’s sales tax. Register your LLC with the New Mexico Taxation and Revenue Departmentto facilitate this.