How to Start a Business in New Mexico
Are you ready to start a business in New Mexico? With low start up costs, no annual report filings for LLCs, and generous privacy perks, the Land of Enchantment is a great place for businesses to succeed. Technically, all you need to start a business in New Mexico is a product or service to sell. But if you want to protect your assets and attract investments, you have to form a legal business entity with the state. That’s where we come in. This comprehensive guide will tell you everything you need to know to protect your personal assets and start a business in New Mexico. Let’s get started!
Ready to Start a Business in new Mexico?Let's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
File New Mexico Initial Report
Draft Internal Records
Get Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
Apply for Trademarks
1. Pick a Business Structure
If you sell something on your own, you’re a sole proprietor. If you do it with someone else, you have a general partnership. While sole proprietorship and general partnerships don’t require you to file any formal paperwork, there is a pretty significant downside: neither sole proprietorships nor general partnerships offer liability protection.
Liability protection means that the owners are not personally liable for the business or its debts. This protects your personal assets, like your house, car, and savings accounts. Only separate entities, like LLCs and corporations, have liability protection. So which business entity is right for you?
New Mexico Limited Liability Company (LLC)
LLCs offer their owners a ton of flexibility and more tax options than the other business entity types. You can manage your LLC yourself or hire someone to do it for you. To form as an LLC in New Mexico, file your Articles of Organization ($50) with the Secretary of State.
New Mexico Corporation
Corporations offer much less flexibility than LLCs, with more concrete processes and hierarchies to follow. While this might initially seem less appealing, keep in mind that these processes often attract investors who appreciate the level of accountability that corporations have. If you’re looking to sell shares or grow big, a corporation could be right for you. To incorporate in New Mexico, you submit your Articles of Incorporation (minimum $100) to the Secretary of State.
Can an LLC be just one person?
Yes! Also called a single-member LLC, this type of entity offers all the same protections and benefits as multi-member LLCs. This is especially useful for small businesses owned by freelancers, artists, e-sale shops, etc.
Read all about Single-Member LLCs.
What about a New Mexico nonprofit?
Incorporating as a nonprofit corporation in New Mexico is as simple as incorporating as a for profit corporation. Just file your Articles of Incorporation ($25). To apply for tax-exempt status, you’ll file paperwork with the IRS.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
It’s time to face the most difficult decision since social media handles were invented: what will you name your business?
If you’re a sole proprietor, your business name is just your legal first and last name unless you use a DBA. If you do form a separate entity like an LLC or corporation, you get to name your business anything you want—within the scope described in NM Stat § 53-19-3 and NM Stat § 53-11-7. Your business name must:
- Be unique business names in the state
- Include a descriptor word such as “LLC” or “Limited” for LLCs and “corp” or “Inc.” for corporations
- Not include any word or phrase that implies the business is for any other purpose than what is stated in the business’s articles
Complete a business name search to see if your business name is available in New Mexico.
Can I reserve a business name in New Mexico?
What is a DBA?
A Doing Business As (DBA) name is any business name you legally use other than your legal business name. DBAs (also called fictitious names) can give your business the opportunity to rebrand or launch a new product line.
Importantly, DBAs are not required in New Mexico. You can use the business name without filing any formal paperwork with the state. However, many businesses choose to “claim” their DBA by filing Articles of Amendment because this can prevent other businesses from using the same DBA.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
Filing your formation paperwork is a crucial step to starting a business in New Mexico. If you are a sole proprietorship or a general partnership, no formation paperwork is necessary. However, if your business is an LLC or corporation, you will need to submit paperwork to the New Mexico Secretary of State.
- To form a New Mexico LLC, file New Mexico Articles of Organization and pay the $50 state fee.
- To form a New Mexico corporation, file New Mexico Articles of Incorporation and pay the state fee, which is $100 minimum.
Your New Mexico formation documents must be submitted online. To fill out your articles, you’ll first need a registered agent. Keep in mind that all the information on these forms, such as your registered agent’s name and address, will be public record.
What is a registered agent?
A registered agent is a person or business that accepts legal mail, like service of process, on your business’s behalf. Your New Mexico registered agent must have a physical address in New Mexico and be available during regular business hours to accept legal notices and forward them to you in a timely manner. You can be your own registered agent if you live in New Mexico, but if you miss a service of process while you’re on vacation, you could find yourself in legal trouble. Hiring a registered agent service guarantees that professionals will be available to accept your legal mail year-round.
How can I keep my information off the public record?
A benefit to registering in New Mexico is that the state offers anonymity to business owners. There are no annual reports or filings required, and the Secretary of State never asks for member, manager, or specific location details on public forms. One way to ensure near complete privacy is by hiring a registered agent service.
A registered agent company like Northwest can put their name and address on your formation documents, keeping your information private and off the public record.
4. File New Mexico Initial Report
LLCs in New Mexico don’t need to file an initial report or an annual/biennial report, so if you’re starting an LLC, you can save yourself some stress and some cash! However, all nonprofits and for-profit corporations need to file an initial report within 30 days of incorporating in New Mexico. Your initial report gives the state basic information about your business, including your contact information and the names and addresses of officers and directors. The fee is $25 for corporations and $10 for nonprofits, and your report must be filed online.
Since the initial report is due within a month of forming your business, it’s a good idea to file it at the same time as filing your articles of incorporation. That way, you know you won’t forget. When you start a corporation or nonprofit with Northwest, we file your initial report at the same time as forming your business.
Nonprofits also need file an annual report every year after registering with the state, whereas for-profit corporations file a biennial report every two years. Again, the fee is $25 for corporations and $10 for nonprofits. Here are the due dates:
• Corporations—every other year on the 15th day of 4th month following the end of your fiscal year (usually April 15th)
• Nonprofits—every year on the 15th day of the 5th month after the end of your fiscal year (usually May 15th)
Read more about How to File a New Mexico Annual/Biennial Report.
What happens if I don’t file my New Mexico annual/biennial report?
Corporations that don’t pay their biennial report on time are charged a $200 late fee. Nonprofits are charged a $10 late fee. Also, your business will lose its good standing and could eventually be dissolved by the state.
5. Draft Internal Records
This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.
Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a New Mexico LLC Operating Agreement template that you can use as a solid foundation.
New Mexico Corporate Bylaws
Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Unlike operating agreements, corporate bylaws are required by law.
As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted a New Mexico Corporate Bylaws template you can use to get started.
Starting a nonprofit? Learn about New Mexico nonprofit bylaws.
6. Get New Mexico Business Licenses
Most businesses in New Mexico will require a business license. Which license—and how many licenses—will depend on the nature of your business and where you’re choosing to set up shop.
New Mexico State Business Licenses
There’s no universal business license required in New Mexico. Still, it’s a safe bet that your business will need at least one business license. You can apply for state licenses and permits through the New Mexico Regulation & Licensing Department or through the individual board/committee that is in charge of your profession’s licensing.
Professional Business Licenses
Professional services, such as law, medicine, and construction, require additional licensing. The process for applying, as well as how many licenses you’ll need, will depend on your individual sector. You can search the New Mexico Regulation and Licensing Department website for your professional division or board, such as the Cannabis Control Division or the Chiropractic Board, to make sure that you are in compliance.
Local Business Licenses
The city and county where your business will operate determines the local business licenses you’ll need. You can check the New Mexico Municipal League to find your specific area, and then follow that link to figure out what licenses your business needs. For example, Santa Fe issues a standard commercial business license, home-based business license, and cannabis business license, available on the City of Santa Fe website.
Learn more about How to Get a Business License.
How do I get a New Mexico business license?
Your application will differ depending on what you’re applying for and where, but generally speaking you just fill out the paperwork, pay a licensing fee, and wait to hear back! Business licenses typically require your general business information, such as name, purpose, FEIN, etc., and are submitted to your state and/or local business departments.
How do I get a professional license in New Mexico?
You apply for a professional license through the board that regulates your profession in New Mexico. For example, chiropractors need a license from the New Mexico Board of Chiropractic Examiners.
How do I get a local business license?
Each city has a different process and list of requirements. For example, the city of Belen requires a a Business Registration application, as well as copies of your state license for particular professions like cosmetologists and tattoo artists. Check with your local business department to learn what you need.
7. Organize Your Money
The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.
Open a Business Bank Account
To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.
Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
Set up Payroll
Hiring employees is an important part of growing your business. To legally hire employees in New Mexico, first you have to set up your payroll. This involves:
- Getting your FEIN
- Registering with the NM Taxpayer Access Point and receiving your CRS Identification Number
- Preparing forms for employees to fill out
- Reporting new hires to the New Mexico New Hires Directory
- Choosing a payroll system or service
If you’re a bookkeeping whiz, you might be able to do payroll yourself using a spreadsheet. But most businesses use a professional service or payroll software.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
Learn everything you need to know about hiring independent contractors.
How do I get a CRS Identification Number?
You file with the New Mexico Taxpayer Access Point to register your business and receive your Combined Reporting System (CRS) identification number. All businesses must register for this number, as it is used to report and pay state and local taxes. This number does not replace your FEIN, so make sure to register for both.
8. Get Business Insurance
Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.
While some types of business insurance, such as workers’ compensation, are legally required, most business insurance is optional. Choose the business insurance that fits your business’s needs and risk level.
Below are a few of the most common types of business insurance.
Workers’ Compensation Insurance
In New Mexico, most employers are required to have workers’ compensation coverage for their employees. Workers’ compensation helps with the financial burden of being hurt on the job. When covered, employees can get assistance with things like medical bills, temporary disability, and lost wages when they are injured on the job.
Workers’ compensation insurance is required for any employer that has three or more employees. If you have fewer than three employees, workers’ compensation is not required, except for businesses licensed under the Construction Industries Licensing Act. CILA businesses must have workers’ compensation, regardless of how many employees they have.
The New Mexico Workers’ Compensation Act requires employers to pay the Taxation and Revenue Department a quarterly fee of $4.30 per employee ($2 is paid by the worker). This fee is not part of the insurance payment but is supplemental.
This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.
Do business owners need workers’ compensation insurance in New Mexico?
This depends on your role in the company. If you actively work in the business, then yes, you will need to be covered by workers’ compensation insurance. If you do not, then you aren’t required to be covered by the workers’ comp plan. However, if you are going to be spending any amount of time at the business, it is a good idea to get coverage for yourself, as personal insurance might dispute a claim if you are injured at your business.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
9. Understand Your Tax Burden
Understanding your tax obligations is a key aspect of starting a business. Your tax burden as a business in New Mexico consists of local, state, and federal taxes. Exactly what you need to pay depends on your city, your profession, and your entity type.
- LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-Corp instead.
- Corporations. Corporations are taxed as C-Corps by default. This means that corporations pay the 21% federal corporate tax rate and the applicable New Mexico corporate tax rate.
To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-Corps, but LLCs can also apply for C-Corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes. C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-Corp tax election.
New Mexico State Business Taxes
The New Mexico Taxation and Revenue Department’s corporate income taxation rates states that the net income under $500,000 is taxed at 4.8%, while net income over $500,000 is $24,000 plus 5.9% of excess over $500,000. A corporation that has a corporate franchise in New Mexico must also pay a $50 annual franchise tax. The CIT-1 is filed on April 15th each year.
Local New Mexico Business Taxes
Your city and county might require you to pay additional business taxes. For example, Albuquerque has a combined 7.75% sales tax rate, with the state’s 5% rate combined with the city’s 2.75% sales tax rate. Check with your local business department to make sure that you are prepared and in compliance.
10. Build Your Business Website
If you want the people of New Mexico to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:
- Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“[email protected]”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
11. Apply for Trademarks
A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.
You can apply to register your trademark with the State of New Mexico or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in New Mexico is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in New Mexico.
You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.
Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.
How do I register for a trademark in New Mexico?
Applying for a trademark in New Mexico requires you to submit a NM Trademark application to the Secretary of State’s office. You’ll need to include three specimens of the mark being used and pay the $50 registration fee. Each additional class code is $25 extra.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.