How to Start a Business in New Mexico

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.

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

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 through the e-filing system. 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.

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.

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.

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.

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.

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.

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.

Liability Insurance

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.

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.

Federal Taxes

• 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.

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.

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.

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.