What is an LLC?
A limited liability company (LLC) is a business structure in the United States that’s set up to shield its owners from the company's debts or liabilities. LLC’s are not as structured as a corporation model, but do offer more protections than a partnership or sole proprietorship, blending the characteristics of both to create a more flexible entity.
Benefits of Starting an LLC in New Mexico
There are plenty of reasons to start an LLC in New Mexico. Here are 4 benefits of starting an LLC in New Mexico.
The most important benefit of forming an LLC is to protect the members from any liabilities or lawsuits the business may encounter. This allows the members to make decisions and take actions that are best for their business without worrying about the impact it might have on their personal finances.
Flexible Tax Management
Even though all the business dealings are done through the LLC and not through its members, the taxes for the business will still be completed and filed along with the members’ personal taxes. However, because of the LLC protections, the individual will be sheltered from much of the business dealings, allowing flexibility and protection. This is what’s known as a “pass through entity” because the taxes “pass through” the business and on to the individuals.
Privacy (if formed anonymously)
LLCs can either be formed with the listed names of its members or anonymously. By filing anonymously, the LLC can operate in the state only using its listed name and not be publicly attached to the names of its members. This makes an LLC an ideal option for those seeking privacy and a greater separation from their business.
Starting an LLC is a signal to the business community that you are serious about your profession and career, and lets your clients know that they are working with a reputable company. An LLC allows you to operate in a professional capacity both with your customers and within your organization.
5 Steps to Form an LLC in New Mexico
Here is how to form an LLC in New Mexico.
Step 1: Choose a Location
Most LLCs are formed in the state they do business in, but many businesses do work in multiple states and therefore have more choices. If this is the case for your business, you can choose which state you wish to file paperwork with and which state will hold the filing for your LLC. Since all states have different tax requirements and business laws, it’s best to research each possibility thoroughly before filing. New Mexico is a popular state to start an LLC in due to the fact there are no required annual fees or reports.
Step 2: Choose a Name
Though requirements vary state by state, there are a few rules about naming your LLC that are consistent across state lines. One major requirement that all states have including New Mexico is that you cannot register an LLC with the same name as another LLC already registered in your state. New Mexico also requires that the initialism, “LLC,” “Limited Liability Company,” or “Limited Company” must be part of the name, usually tagged on to the end.
You also have a choice to add a DBA (doing business as) to your registered LLC name. This is a good option for a business who wants their customer facing brand name to be something different than their legal business name with the state.
If you choose to start your LLC in a state other than New Mexico, you should check their specific requirements listed on their Secretary of State homepage where you can also double-check your proposed name against those already registered.
Step 3: Choose a Registered Agent
Sometimes referred to as a statutory or resident agent, this is a person or business entity who will be responsible for receiving communication and documents regarding your LLC. This person must be an adult living in New Mexico (with an in-state address) who can be relied upon to accept any documents. Typically, a member of the LLC is designated to this role, but it is not required. The registered agent can also be a business entity that is licensed in the state of New Mexico.
Step 4: Operating Agreement
Although your LLC’s operating agreement doesn’t have to be filed with the state, it’s still an important document that all LLCs should have on hand. The operating agreement lays out the basics of how you will run your LLC, how new members are admitted and how existing members are removed, how you handle profits and losses, and what each member is required to do as part of the LLC.
In cases where one member wishes to leave or dissolve the LLC, an operating agreement can act as a guideline ensuring the LLC stays intact even with instability within it.
Step 5: Articles of Organization/Formation
Depending on the state you’re filing in, this will be called Articles of Organization or Articles of Formation. In New Mexico it is called the Articles of Organization. Unlike the operating agreement, this document will need to be filed with the state and contains basic information about your LLC that will remain on file with the Secretary of State. New Mexico requires that this be filed online and charges a fee of $50.
When filing be prepared to enter the following information for your LLC:
- The name of your LLC
- The effective date of your LLC, and how long your LLC will be in place
- A statement as to why you formed your LLC
- The name and address of the registered agent
- The physical and mailing address of the LLC’s place of business
- How the LLC will be managed (either by members or by outside managers)
- Whether the LLC has only one member or more than one
- Name and contact of the LLC’s organizer
Who Should Start an LLC?
If you have your own business or are thinking about starting your own business, forming an LLC can be a smart move. Not only will it tell customers that you are operating in a professional capacity, but it will also protect your personal assets from any injury your business might incur. It is especially advisable to do this if your business will see ups and downs in its profits or losses, or if there’s a possibility that lawsuits will be filed against it.
Also, if you have a lot to lose personally (like investments, properties, or trusts) it’s prudent to start an LLC to know these assets are protected from anything that may happen with your business.