How to Incorporate in New Mexico vs. How to Start a New Mexico LLC

A Guide to Choosing the Best Business Entity in New Mexico

When you’re ready to start your own business in California, the first step is understanding whether a Limited Liability Company (LLC) or a corporation is best for your business. The LLC and corporation have the most desirable elements of all the business entities, such as limited liability protection and flexible tax structuring options. This New Mexico guide on LLC formation and incorporation will explore each of these entities specific to the state of New Mexico and what they have to offer for your business. We’ll go over the details of starting a New Mexico LLC and a New Mexico corporation, what to expect with their annual maintenance, and the advantages and disadvantages of each entity.

After we’ve figured out which business structure suits your needs best, your next step is hiring Active Filings to get you where you need to be in the quickest amount of time. Our starter package begins at $25 (plus state fees). Hire us and you’ll quickly understand why Active Filings is America’s most reliable business incorporation service.

 

Hire us to form your LLC or Corporation in New Mexico!

LLCs vs. Corporations

Here are the main characteristics true of all LLCs and corporations to help you begin making your decision:

  • Maintenance
    With a corporation, expect a high level of maintenance on both a day-to-day and annual basis. You’ll see exponentially more formalities in a corporate environment than an LLC, like electing a board of directors, holding shareholder meetings, and maintaining internal records such as meeting minutes and stock issuance. With an LLC, you can expect a minimal amount of maintenance. LLCs will need only minimal paperwork, have better flexibility when a decision is needed, and have low annual upkeep. An LLC is the best choice if you have a small to medium-sized business and can only handle a low amount of maintenance.
  • Tax Structure
    The LLC is the simpler and less expensive option in terms of time and paperwork for business owners during tax season, since an LLC is not a separate taxable entity from its owners. LLCs are pass-through tax entities, where income and losses pass through the business and onto the members to report on their personal income tax return. Corporations are more advanced for a business owner to take care of during tax season. A standard corporation defaults to a tax structure called a C corporation, and is known for what’s called double taxation, where a business’s net income is taxed initially by a corporate tax, and then taxed again on personal income, after shareholders receive their profits (dividends) and losses. C corporations are typically taxed at a lower rate on profits, and have opportunities for tax deductions such as health care and travel, and can retain its earnings to be reinvested into the company’s growth. A corporation can potentially elect an S corporation tax status if it’s more beneficial. When you elect an S corporation tax status, your corporation becomes a pass-through entity, and is allowed tax advantages such as dividends not subject to self-employment tax.
  • Investors
    Starting a corporation is the suitable choice if you will be expanding your business with funds coming mostly from investors. Investors are more comfortable investing their time and funds in a reputable business structure that offers stock, like a corporation. Investors don’t have to worry about complicating their personal taxes when they invest in a corporation, and only get taxed on profits actually distributed to them. Investors view corporations as a dependable business structure that will provide them with a return on their investment. Having a corporate structure will profoundly impact the ability to raise investment money. On the other hand, investors can still invest in an LLC by owning a percentage of that LLC. Owners of LLCs will have to pay taxes on their distributive shares, even if they haven’t received a distribution on those profits, and can’t issue stock, which is a turn-off for many investors. Consider a corporation if you plan to expand your business.
  • Prestigious Title
    Every business starts with its appearance, and having the “LLC” or “Inc” ending on your business name will give it a level of prestige. These endings convey permanence and encourage trust from potential investors or clients, and show that you are serious about your business. While both entities provide a level of prestige, incorporating provides a higher level of prestige for your business, since the corporation is the oldest and most traditional entity type. Keep in mind the LLC has surpassed corporations in popularity in most states, and the prestige of an LLC is continuing to grow.

 

NM LLCs vs. NM Corporations

Now that we’ve delved into the main characteristics that apply to all LLCs and corporations, next is to dig into more specific characteristics of what makes a New Mexico LLC or New Mexico corporation unique from other states, which will bring us to the final answer on which entity is best for your business. Each state has its own set of statutes and tax laws that govern the way its businesses operate, and these unique details must be considered when choosing your business entity. The information in this section will provide these specifics for the New Mexico LLC and the New Mexico corporation.

  • New Mexico Corporate Income Tax
    The New Mexico corporation income tax is a business tax imposed on the gross taxable income of C corporations. Nebraska has a three-bracket tax system:
Gross Taxable Income Tax Rate
$0 – $500,000 4.8%
$500,000 – $1,000,000 6.4%
$1,000,000+  7.6%

If you are considering a corporation, talk to a professional about how these corporate income tax rates can impact your business compared to the tax structure of an LLC.

  • New Mexico Corporate Franchise Tax
    The New Mexico corporate franchise tax is a business tax on corporations registered to do business in the state. This franchise tax is a flat $50 per year (or partial year).Although corporations in New Mexico are taxed twice, once by a franchise tax and again with a corporate income tax, this franchise tax is significantly low and should not make-or-break your decision to incorporate.
  • New Mexico Individual Income Taxes
    The individual income tax rate in New Mexico is a point of interest for LLCs, since the business income passes through the LLC and onto the members to report on their individual income taxes. Individual taxes are on a graduated scale, which is a perk for smaller LLCs getting to pay lower taxes.New Mexico taxes personal income at a series of marginal rates ranging from 1.7% to 4.9% The individual income tax brackets are as follows:
Income Tax Bracket Tax Rate
$0 – $5,500 1.7%
$5,501 – $11,000 3.2%
$11,001 – $16,000 4.7%
$16,001 – ∞  4.9%
  • New Mexico LLC Protection From Creditors
    LLCs in New Mexico have a strong level of protection against creditors (a person who is owed funds or assets by a debtor). Creditors only have one remedy against the debtor of an LLC, which is a charging order that puts a lien on a debtor’s interest (funds and assets) and creditors then have a right to receive any distributions made to the debtor from the LLC, if the LLC makes a distribution. Often times, this leads to the creditor ending up with nothing, since creditors can’t order the LLC to make distributions.
  • New Mexico LLCs Can Be Totally Anonymous
    New Mexico is the only state that offers the option to have a totally anonymous LLC. This means your identifying information, such as name and business address, will never be visible to the public if you don’t want it to be. As long as you have another person or business (such as Active Filings) to be your registered agent, nothing will link your name to the LLC.
  • No Annual Reports Due For LLCs, Only Biennial Reports Due For Corporations
    An annual report is meant to update or confirm the records for your business, and lets your business remain in good standing. In most states, its required to file an annual report for your LLC and corporation.Unlike most states, New Mexico LLCs are not required to submit an annual report, and corporations are only required to file a biennial report every two years. This is a big perk for both LLCs and corporations in New Mexico, saving them a significant amount of time and money.

 

New Mexico LLC or New Mexico Corporation? Final Answer.
In order to make your decision on forming either a New Mexico LLC or a New Mexico corporation, consider the size of your business, priority of investors, level of maintenance you’ll need, and the most beneficial tax structure for the future of your business.

The New Mexico LLC is best for you if you have a small to medium-sized business. LLCs in New Mexico stay true to design in terms of simple business formation and maintenance, straightforward management, strong flexibility in decision-making, and limited liability protection. If growing your company large with investors is not your top priorities, you’re looking for the least expensive and sophisticated taxes and annual maintenance, and needing limited liability protection for your business, the LLC is your answer.

The New Mexico corporation is best for you if you plan to grow your business big with the funds from investors, and you have the means for the amount of maintenance required. A New Mexico corporation remains true to character in its substantial amount of paperwork, higher maintenance, and involved yet beneficial tax structure.

How to Incorporate in New Mexico

When you’re ready to form a corporation in New Mexico, also known as incorporating, you’ll need to file the Articles of Incorporation with the New Mexico Secretary of State. You can find this document online at the Secretary of State website. Once your Articles of Incorporation are approved, your corporation is officially formed.

You can file the Articles of Incorporation in the following ways:

  • Online at the New Mexico Secretary of State website
  • By postal mail

Filing your Articles of Incorporation on the website is faster, more secure, and is the preferred method by the Secretary of State. The fee for filing your New Mexico Articles of Incorporation costs $100 for up to 100,000 authorized shares, plus a $1 fee for each additional 1,000 shares, with a max filing fee of $1,000. You can expect your New Mexico Articles of Incorporation to be approved in about 15 days, not including mailing time if you choose that method.

The Articles of Incorporation must include a Document Delivery Instruction form and a Statement of Acceptance of Appointment form, signed by your registered agent. These additional forms are included in the Articles of Incorporation packet you can download from the Secretary of State website.

To complete your New Mexico Articles of Incorporation, include the following information:

Enter your corporation’s name exactly as you would like it to appear. Your corporation name must include one of the following words: “Incorporated,” “Corporation,” “Limited,” “Company,” or an abbreviation of one of those words.

Your corporation name can’t imply it is organized for a purpose other than what is mentioned in the Articles of Incorporation. The name can’t already be in use, and can’t sound similar to the name of any other company in New Mexico.

List the number of shares your corporation is authorized to issue (most corporations start out with around 1,500). You can attach a schedule to this filing if you need to.

Describe the purpose for creating your corporation. The purpose doesn’t need to be specific, and is best left as a general statement. For example, a business that provides writing services would use a purpose statement such as “To provide writing services and to engage in any other lawful activity for which corporations may be incorporated in this state.”

Check the box according to whether your corporation will be perpetual (continuing indefinitely) or end on a specific date or after a specific or number of years (state that information in the blank space provided).

A registered agent is a person or entity in the state that receives service of process from the government on behalf of a business. Indicate the name of your registered agent and list their New Mexico physical office address and mailing address.

If you hire Active Filings to form your New Mexico corporation, we’ll provide a year of registered agent service for no additional charge and track all required maintenance filings to keep your corporation active, as well as provide a bevy of free online tools in your online Active Filings account.

List the address of the principal place of business and the mailing address.

Enter the names and complete addresses of the initial board of directors. At least one person is required here.

Enter the names and complete addresses of each incorporator At least one incorporator is required here.

Have all incorporators sign and date here.

How to Start an LLC in New Mexico

When you’re ready to form an LLC in New Mexico, you’ll need to file the Articles of Organization with the New Mexico Secretary of State. You can find this document online at the Secretary of State website. Once your Articles of Organization is approved, you officially have your LLC created.

You can file the Articles of Organization in the following ways:

  • Online at the New Mexico Secretary of State website (recommended)
  • By postal mail

Filing your Articles of Incorporation on the website is faster, more secure, and is the preferred method by the Secretary of State. The fee for filing your New Mexico Articles of Organization costs $50. You can expect your New Mexico Articles of Organization to be approved in about 15 days, not including mailing time if you choose that method.

The Articles of Organization must include a Document Delivery Instruction form and a Statement of Acceptance of Appointment form, signed by your registered agent. These additional forms are included in the Articles of Organization packet you can download from the Secretary of State website.

To complete the New Mexico Articles of Organization, include the following information:

Enter your LLC name exactly as you would like it to appear. Your company name must include the words “Limited Liability Company,” “Limited Company,” ” “L.L.C.,” “LLC,” “L.C.,” or “LC.” The word “Limited” can be abbreviated as “Ltd,” and the word “Company” as “Co.”

Your company name can’t imply it is organized for a purpose other than what is mentioned in the Articles of Organization. The name can’t already be in use, and can’t sound similar to the name of any other company in New Mexico.

Leave this area blank if you would like your LLC to be perpetual. If you’d like your LLC to end on a specific date or exist for a certain number of years, state that information here.

A registered agent is a person or entity in the state that receives service of process from the government on behalf of a business. Indicate the name of your registered agent and list their New Mexico street address, followed by your principal office street address and mailing address.

If you hire Active Filings to form your New Mexico corporation, we’ll provide a year of registered agent service for no additional charge and track all required maintenance filings to keep your corporation active, as well as provide a bevy of free online tools in your online Active Filings account.

If all the members are owners and are involved in decision-making and day-to-day operations, the LLC is member-managed. If certain members are appointed as managers to make the decisions and run day-to-day operations, the LLC is manager-managed.

Check the corresponding box depending on whether your LLC is manager-managed or is a single member LLC. You have the option to list names of managers or members if you’d like.

Enter the date you would like your LLC to become effective. If you don’t have a preference and want your LLC to be effective on the Secretary of State’s file date, leave this part blank.

Have all organizers sign and date here.

New Mexico Biennial Reports

In order to keep your business in good standing and updated with the state of New Mexico year after year, you’ll need to take care of a few maintenance tasks. Unlike most states, New Mexico does not require LLCs to file an annual report, and only requires corporations to file a biennial report. The basic maintenance tasks are as follows:

1. File your corporation’s biennial report
2. File your annual New Mexico business tax returns

In this section, we’ll tell you the basic instructions and resources you’ll need to help you take care of your tax-related upkeep and annual maintenance.

What is a New Mexico corporation biennial report?
New Mexico corporations are required to file biennial reports with the New Mexico Secretary of State. The report is meant to update or confirm the records for your business, and lets your business remain in good standing. You can update information such as business address, directors, and officers, using the biennial report form.

How do I file a corporation biennial report in New Mexico?
New Mexico corporations need to file their biennial reports either online at the Secretary of State website, or by postal mail. Filing on the website is faster, more secure, and is the preferred method by the Secretary of State.

How much does it cost a corporation to file a biennial report in New Mexico?
New Mexico corporations will need to pay a biennial report fee of $25.

When are New Mexico corporation biennial reports due?
Your New Mexico corporation biennial report is due by the 15th day of the 4th month after the company’s fiscal year end, or April 15th for calendar year filers. When you incorporate, you will be assigned a corporation number. If your corporation number ends in an even number, you will be required to file biennially on every even-numbered year. If your corporation number ends in an odd number, you will be required to file biennially on every odd-numbered year.

Please note that as of July 1, 2018, this due date changed from the 15th day of the 3rd month to the 15th day of the 4th month after the company’s fiscal year ends.

Does New Mexico have an initial report due after forming a business?
Yes, corporations must submit an initial report to the Secretary of State within 30 days after incorporation. These can be filed by postal mail or online (recommended) at the Secretary of State website.

New Mexico Business Taxes

The tax season for businesses involves prior planning and complex paperwork, and you probably have a lot of questions. The filings can get complicated and you may need the help of a tax service or CPA to complete these requirements, but regardless of your accounting skills, we’re here to help get you started.

Take a look at our New Mexico Business Tax FAQ below:

What is the New Mexico corporate income tax?
The New Mexico corporation income tax is a business tax imposed on the gross taxable income of C corporations. Nebraska has a three-bracket tax system:

Gross Taxable Income Tax Rate
$0 – $500,000 4.8%
$500,000 – $1,000,000 6.4%
$1,000,000+  7.6%

If you are considering a corporation, talk to a professional about how these corporate income tax rates can impact your business compared to the tax structure of an LLC.

What is the New Mexico corporate franchise tax?
The New Mexico corporate franchise tax is a business tax on corporations registered to do business in the state. This franchise tax is a flat $50 per year (or partial year).

Although corporations in New Mexico are taxed twice, once by a franchise tax and again with a corporate income tax, this franchise tax is significantly low and should not make-or-break your decision to incorporate.

What is the New Mexico individual income tax rate?
The individual income tax rate in New Mexico is a point of interest for LLCs, since the business income passes through the LLC and onto the members to report on their individual income taxes. Individual taxes are on a graduated scale, which is a perk for smaller LLCs getting to pay lower taxes.
New Mexico taxes personal income at a series of marginal rates ranging from 1.7% to 4.9% The individual income tax brackets are as follows:

Income Tax Bracket Tax Rate
$0 – $5,500 1.7%
$5,501 – $11,000 3.2%
$11,001 – $16,000 4.7%
$16,001 – ∞  4.9%

What forms do you file for your New Mexico business taxes?
Corporations
For both the corporate income and franchise tax, file Form CIT-1.
LLCs
For single member LLCs, submit a Schedule C as part of your personal tax return.
For multi-member LLCs, submit Form 1065 along with Schedule K-1, included within the form.
For all LLCs in New Mexico must file an informational return known as Form PTE.

When are my New Mexico business tax returns due?
In New Mexico, the LLC informational returns, corporate income taxes, and corporate franchise taxes are due on the 15th day of the fourth month after the close of a business’s tax year, or April 15th for calendar year filers.

Hire us to form your LLC or Corporation in New Mexico!