There are a few things to think about before you start a Limited Liability Company in New Mexico, such as the state’s legal requirements and formation time frames. The formation of LLCs is different and less complex than the incorporation process. In this guide we’ll examine how long it takes to establish an LLC in New Mexico using different filing options that are available, learn about the business climate in New Mexico, and how to start an LLC. These pointers can be helpful to form an LLC and maintain the integrity of your company over time.
Discovering New Mexico
New Mexico is called “the Land of Enchantment” because of its beautiful scenery that ranges from forests to mountains and to deserts.
It borders Oklahoma, Colorado, Texas, Mexico, Arizona and Utah. It’s home to part of the Rocky Mountain range, and the Great Plains, as well as the Rio Grande River. Carlsbad Caverns is home to over 119 different caves. The White Sands National Monument is located in New Mexico, too, which is the world’s biggest sand dune field made of gypsum.
When it comes to the state’s natural resources, around half of the state’s total income from natural resources is pulled in from natural gas. It’s also the top producer in the country of perlite, which is a specific glass used for gardening and in insulation. And it produces around ¾ of the nation’s potash, which is a potassium mixture found in fertilizers.
Economic Overview of New Mexico
New Mexico has a Gross State Product (GSP) of $96.5 billion, and it had a growth rate of 15.6k% from 2018-2023. The top industries by revenue in New Mexico are Oil Drilling & Gas Extraction, Hospitals, Public Schools, Health & Medical Insurance, and New Car Dealers. The companies that employ the most people in New Mexico are the State of New Mexico, Honeywell International Inc., Walmart Inc., University of New Mexico, and Presbyterian Healthcare Services. The sectors in New Mexico that contribute the most to its overall GDP are Mining, Real Estate & Rental & Leasing, Professional, Scientific & Technical Services, Healthcare & Social Assistance, and Retail Trade.
Business Environment in New Mexico
Usnews.com has rated New Mexico #45 in business environment and employment, #27 in growth and #47 in #46 in economic opportunity.
It ranks #10 in affordability. The cost of living index in the state is 89.9, while it’s 100.0 on the national level. However, the state’s median household income is $53,992 which is $15,725 under the national average. And unsurprisingly given those statistics, the poverty rate in the state is 18.4% (the national average is 12.8%).
In regards to infrastructure, New Mexico ranks #49 for internet access, and #39 for transportation. 34.0% of the state’s roads are in poor condition, while the national average is 19.0%.
State-Specific Regulations and Incentives for Forming an LLC in New Mexico
There are a number of regulations and incentives for forming an LLC in New Mexico. These are just a few:
- High Wage Jobs Tax Credit: This is a tax credit for corporate income that is equal to 8.5% of the wages and benefits paid for every new job created and maintained over a 44 week period. These positions are required to pay a salary of a minimum of $40,000 for projects in communities with under 60,000 residents, or $60,000 in communities with more than 60,000 residents. You can take the credit for four years, and the credit award amount can’t go over $12,750 per job. After the end of three qualifying periods, you can only claim the credit for a year. You can apply the credit to state gross receipts tax, withholding tax and compensating tax.
- Rural Jobs Tax Credit: These are gross receipts, corporate income and personal income tax credits for manufacturers and non-retail service companies with locations in rural communities. They’re divided into two tiers. Tier 2 is for Non Metro areas with populations of more than 15,000 people and has a maximum tax credit for each job of 25% of the first $16,000 in wages paid for the job. Tier 1 is for any rural area and has a maximum tax credit for each job of 12.5% of the first $16,000 in wages paid for the job. Qualifying jobs are required to be filled by an eligible employee for at least 48 weeks during a 12-month period. You can carry unused credits forward for up to three years.
- Investment Tax Credit for Manufacturers: This is a tax credit for corporate income, personal income or gross receipts, and it’s equal to 5.125% of the value of eligible equipment. To qualify, 1 employee must be added for every $750,000 of equipment up to $30 million. If the amounts go over $30 million, then you’ll be required to add one employee per every $1 million of equipment. You can also claim the credit if you acquired the equipment using an IRB. This provides a double benefit because you won’t have to pay gross receipt or compensating taxes on the purchase or installation of the equipment.
- New Market Development Tax Credit: This is a tax credit that’s available to taxpayers in New Mexico that install solar energy systems on their property for hot water, electricity or space heat.. This could be commercial, residential, or agricultural properties. The credit is 10% of the solar energy system’s value up to $6,000 per taxpayer per year.
- Gross Receipts Tax Deduction: These deductions are for manufacturing equipment and consumables, solar energy systems, directed energy systems, wind and solar systems, as well as qualified space activities.
- LEDA Grants: The Local Economic Development Act (LEDA) provides discretionary grants that are designed to assist with business attraction efforts and infrastructure development which are in line with economic development plans.
- Job Training Incentive Program (JTIP): This program provides grants that are used to cover training costs for new jobs. They vary from 50%-75% of the employee wages and travel expenses for training. Projects involved with processing, manufacturing, or assembling of manufactured or agricultural products, warehousing, storing, distributing or selling agricultural or mining products, or are an “Economic Base Employer” who is eligible for training assistance provided by the Economic Development Department’s Job Training Incentive Program.
- Technology jobs and R&D Tax Credit: Facilities that qualify can get a credit that equals 5% or 10% for rural areas that can be applied against personal income tax or corporate income tax if their base expenses for payroll have increased by a minimum of $75,000 per $1,000,000 of the expenditures that were claimed. These credits can be carried forward up to three years.
Pros and Cons of Establishing an LLC in New Mexico
There are both perks and limitations when it comes to forming an LLC in New Mexico.
LLCs in New Mexico aren’t required to file an annual report. Not only does that save a ton of money in annual filing fees, it also saves you some paperwork. Plus, usually if you forget to file an annual report, you risk late fees or even losing your company’s Certificate of Good Standing.
There aren’t public information restrictions in New Mexico. This means that you’re not required to add the name of your company’s manager on your Articles of Organization when you file them. So, signing and filing your Articles of Organization doesn’t automatically release your name and address on the public record, as it would in other states.
You can conduct business in other states. When you file for an LLC in New Mexico, you’re authorized to do business in that state, as well as other states, without filing for LLCs in other states. In many places, your domestic LLC covers just the state you’re located in, but if you want to do business in other states, you’ll need to file for a foreign LLC in them. This is a pretty big time and money saver.
It’s relatively cheap to file for an LLC in New Mexico. It typically starts under $300 to file an LLC- start to finish.
But it’s not all good.
New Mexico has a corporate franchise tax. This is something you’ll need to know about if your LLC is set up to be taxed as a corporation. It’s a minimum of $50. Even if your business doesn’t actually sell anything, you’ll still have to pay this tax.
Sales tax in New Mexico can be pretty high. Although the state tax is 5.125%, but local requirements bring it up to 7% in many places.
You’re not required to have an operating agreement in New Mexico, unless you want to benefit from asset protection. To take advantage of asset protection, you have to file an operating agreement that lists your company’s assets. That sort of makes sense because the state is keeping record of the assets that are being protected, but it also means that asset protection in this state isn’t automatic.
Procedure of Establishing an LLC in New Mexico
You should be familiar with the steps to form an LLC in New Mexico before reading about the formation time frame in the state. In this section, we’ll tell you which documents you need for filing, and give you step-by-step directions.
Necessary Documentation for Filing an LLC in New Mexico
You’ll need to gather a number of documents before filing, such as:
- Articles of Organization Form: The Articles of Organization form is one of your most important formation documents. It provides the Secretary of State with extensive details about your company. Some of the information you’ll provide on the form is your business name, address, duration and purpose, as well as information about your registered agent, a list of LLC members and their contact information, and the management style of your LLC.
- Operating Agreement: The New Mexico Secretary of State doesn’t require you to create an Operating Agreement for your LLC, but it does highly recommend one. You will find yourself referring to this internal business document quite often. It includes everything from your Articles of Organization form, plus information about the contributions of LLC members, the distributions of profits and losses among them, the roles of LLC members, important information about how to add and remove members, and what to do if an LLC member dies, a list of LLC managers, their voting rights and meeting schedules. An operating agreement determines how LLC members should behave, and provide operational instructions for your business.
- Name Reservation Application: After you’ve chosen a viable name for your Limited Liability Company, you must file a Reservation of Limited Liability Company Name form with the Secretary of State.
- EIN (Employer Identification Number): There are a number of things you’ll need an EIN for, like hiring employees, filling out certain tax documents or other government applications, and opening a business bank account. Luckily, you can apply for an EIN online on the IRS website for free and receive one immediately.
- Tax Registration: You’re required to enroll your business with the New Mexico Taxation and Revenue Department for a Business Tax Identification Number. Furthermore, if you own a multi member LLC, you’re required to file an Income and Information Return for Pass Through Entities (PTE) form prior to filing your federal income taxes.
- Business License: New Mexico won’t require you to obtain a state business license, but you need to check in with county and local clerks to find out what sort of licenses and permits you need from the local government.
Legal Requirements for Starting an LLC in New Mexico
To establish a Limited Liability Company in the state of New Mexico, follow these steps:
- Acquire an Articles of Organization form: First, you need to have your Articles of Organization form because it’s basically an application to get your LLC. You can pick one up from the Secretary of State’s office, or on their website.
- Decide on a Name for Your Company: Picking a name for your company isn’t as easy as coming up with a name, unfortunately. Your company name can’t be too similar to a business name already in use by a company in the state. So if a company in the state is called “Good Burger”, you can’t call yours “Good Burgers”. It also needs to contain wording that indicates that it’s an LLC, such as “Limited Liability Company”, “LLC”, “Ltd.” or “Co.”. To find out if your business name is available, head to the Secretary of State’s website and run a search of their business name database. Once you’ve landed on an available business name, you need to file a Reservation of Limited Liability Company Name form.
- Designate a Registered Agent: One of the requirements for owning an LLC in New Mexico is having a registered agent. A registered agent is an individual or business who will receive official correspondence from government agencies and legal notices at their physical address on your company’s behalf. Some people choose to designate a trusted individual, like a family member or close friend, while other business owners choose to designate a professional registered agent service so they can rest easy.
- Choose Your Address: You should avoid using your home or personal address as your business address since it will be visible to the public and compromises both your privacy and security. You could request to use your registered agent’s address, or utilize a virtual address as alternatives. However, using a P.O. Box as your business address isn’t legal.
- Sign and File Your Articles of Organization: Verify that every field on the form is filled out accurately. The Articles of Organization must then be signed and submitted to the New Mexico Secretary of State.
Time Frame for Establishing an LLC in New Mexico
Let’s take a look at the time it takes to form an LLC in New Mexico. First thing first, processing time is just the time it takes for clerks to process your paperwork, while approval times include processing times and are the overall amount of time it takes for you to receive approval for your LLC once you’ve submitted your paperwork. Here’s what you need to know about the formation time frame in New Mexico.
How Long Does the Initial Paperwork Take in the State of New Mexico?
Approval time for mail filing is between 2-3 weeks, and 1-3 business days for online filing.
Processing Times in the State of New Mexico
Processing times to file by mail are 15-20 business days, or 1-3 business days if you file online in New Mexico.
Common Delays in the LLC Formation Process in New Mexico
Here are some of the things you should be aware of because they could disrupt your LLC’s formation process.
- High Volumes of Filings: Any time the Secretary of State’s office receives a huge amount of filings, it can slow the formation process to a crawl as workers diligently review them. This is because many of the mail filings must be manually reviewed. Also, most businesses file at either the beginning or end of the year. Be prepared for slower-than-usual processing times if you must file at the beginning or end of the year.
- Documentation Issues: Your documents must be pristine, with no errors, typos, or inaccurate information, and you’re required to have two copies of your Articles of Organization. It would be a shame if requirements aren’t met, or one little thing goes wrong, because your documents could be rejected by the Secretary of State. You’ll then need to correct the mistakes and re-submit your documents, which will certainly cause delays.
- Holidays and Weekends: If you’re going to file online, then processing in New Mexico will typically take 1-3 business days. But holidays and weekends don’t count as business days. If you submit your documents on Friday, then it could be Wednesday or Thursday before your documents are processed because they won’t be processed on Saturday or Sunday. Or if you file on December 23rd, your documents likely wouldn’t be processed until the 26th because of Christmas break.
Expedited Processing for LLC Formation in New Mexico
Choosing the expedited processing option is your best bet for quick LLC formation if your state offers it.
What Are the Expedited Options Available?
Unfortunately, expedited processing options aren’t available in New Mexico.
Additional Costs for Expedited Services in New Mexico
You would ordinarily be required to pay a fee on top of the state’s filing fee for expedited processing, but New Mexico doesn’t provide expedited processing, so no extra fees.
Comparing LLC Formation Time Frame in New Mexico with Other States
One of the things you should consider when forming an LLC is whether you want a domestic or a foreign LLC, and comparing time frames can help with that. Here’s a look at the formation time frames in other states.
Brief Comparison with Key States
In New Mexico, processing times to file by mail are 15-20 business days, or 1-3 business days for filing online, and there aren’t expedited processing options.
New Mexico isn’t the only state that doesn’t offer expedited processing. But in some states, even expedited processing is slow. It takes 5 days for expedited processing in Arizona, and 7 days in Maryland. Online processing in Arizona takes 14-16 days, 13-15 days in Texas, and 12-14 days in Washington. And while 15-20 business days seems like a lot for mail filing, it takes 5-8 weeks in Maryland, 4-8 weeks in Texas, 5-6 weeks in Washington, and 8 months in New York.
In West Virginia, Nevada, Montana, Michigan and Delaware, there are 1 hour expedited processing options. Several states have immediate processing for online filing. And Ohio and Kentucky have 1 day processing on mail filings.
Why is New Mexico a Favorable Place for Forming an LLC?
New Mexico is a good place to form an LLC because it has low filing fees. There are no annual report requirements in New Mexico, so that’s an expense you can cross off. There aren’t public information requirements in the state, which keeps your private information private. And you’re allowed to do business in other states with an LLC from New Mexico, without filing LLCs in other states.
