Limited liability companies are a business structure in the United States that separate the business owner from the business. After an LLC is formed in New Mexico, the owners are no longer liable for the debts or liabilities of the company. Although this is similar to that of a corporation, there are also aspects of partnership or sole proprietorship as well.
How an LLC is more flexible than a corporation
When forming a business as a corporation there are many rules to adhere to, but an LLC is more flexible. For example, an LLC can be owned by only one owner, but it can also be a partnership or multi-member structure. There is no limit to the number of members an LLC may have.
Additionally, LLCs are automatically taxed as a pass-through entity. This means that the profits and losses will be given to the owners, and paid out through their own personal taxed returns. Corporations, however, are taxed twice. Once on the corporate level, and once on the personal level. The only exclusion of this is that S corps are given pass-through taxation as well, but have a limit of 100 members, and other corporate requirements.
What are the Requirements to Start an
LLC in New Mexico
If you want to start an LLC in New Mexico these are the requirements that you need to meet.
Business Name
When forming an LLC in New Mexico you are required to choose a unique name. This must not be the same as any other LLC name in New Mexico. It is also required to have some variation of “Limited Liability Company,” within it.
Registered Agent
The registered agent of an LLC is a person or third party that accepts due process and paperwork on behalf of the LLC. They are required to be over 18 years of age, have a physical presence in the state of New Mexico, and be available during business hours.
Operating Agreement
The operating agreement of an LLC allows LLC members to create their own rules to govern their LLC. The operating agreement is essential if you have managers or multiple members. Operating agreements can help members settle disputes in and out of court because it acts as a legal code of conduct for managing the business.
Articles of Organization
Filing the articles of organization is essentially telling the government about your LLC. It should include the address and name of the LLC, as well as information about the registered agent, all the owners, and managers. There is also a $50 fee to register in the state of New Mexico.
Tax Forms
There are two main tax forms required to file taxes for an LLC:
- LLC tax form 1065: Tax return on partnership income. It is filed along with other income tax documents.
- Tax form 1099: For companies who work with your LLC if they paid you over $600.
Who is an LLC Best for?
LLCs are an extremely versatile type of business. They are perfect for any business from small to large and are one of the most common types of entities to own. This is because you can form as a single member as well, but with added protection over a sole-proprietorship.
As a single business owner, an LLC is a great option to limit your liability, but it is also a good option for larger businesses with many owners. Especially in the state of New Mexico where there is no annual fee.
For high-income individuals, sometimes a corporation is the better option. This is because the corporate taxation level is 21%. Although LLCs are not taxed directly, the profits and losses are passed to owners. This means owners will pay tax at their own personal tax rate, which can be higher than that of the corporate tax. Despite this, LLCs are allowed to elect taxation, which means forming a corporation and adhering to corporate rules may not be necessary.
Work with a Lawyer to Create Your LLC
Working with a lawyer to form an LLC in New Mexico can help to ensure that you remain in compliance. Although there is no annual fee or report, forming an LLC does require a lot of different steps and paperwork. By working with a lawyer you can understand what you need and do so quickly, without delay.
