And there are quite a few advantages to setting up a corporation in New Mexico. Some of them include the zero inventory tax, one of the lowest property taxes in the nation, competitive incentives as well as affordable real estate.
The following step-by-step guide will show you how to start a corporation in New Mexico.
1. Select a name for your corporation
Every business structure or business type in the state of New Mexico must choose a business name. This is the first step in the process of setting up a New Mexico corporation. Additionally, your business name must comply with state naming requirements.
General corporate name guidelines
The naming requirements that must be adhered to include:
- Your New Mexico corporation name must not be the same or even similar to other existing business entities in New Mexico
- Your New Mexico corporation name must not be similar to New Mexico reserved names as well
- Your New Mexico corporation name should not suggest that it is formed for any other purpose other than what is outlined in your company’s Articles of Incorporation
- Your New Mexico corporation name must include the word Corporation, Inc., company, limited, or an abbreviation of any of these words
The New Mexico state statute provides important naming guidelines for choosing your New Mexico corporation name.
If you’ve been thinking about registering your business name as a trademark, you should know that they are benefits as well as important factors to consider.
Essentially, a trademark is simply a symbol, logo, phrase, or design that distinguishes your goods from all others. Registering a trademark offers brand protection while also making it easier to enforce.
Some of the benefits of trademarking a New Mexico corporation name include preventing confusion and ensuring that customers are always aware of who they are doing business with.
Additionally, a trademark defines your brand and business name, preventing others from making use of your business name. Trademarking a New Mexico corporation’s name gives it national recognition and also helps secure funding.
To trademark a Mexico corporation name, you need to search the trademark database to ensure that the name is indeed available. Thereafter, complete and file your trademark application with the United States Patent and Trademark Office’s website.
Your New Mexico corporation’s entity name is basically its legal business name. This is the name that both the federal and state governments use to identify your business. Therefore, it’s essential that your entity name or legal name be placed on all formation documents, including all official correspondence with the state of New Mexico.
DBA (Doing-business-as) name
DBA is short for “doing business as”. There may be times when you want to do business under a different name aside from your entity name. If that’s the case, then you need to register a DBA with the state.
The DBA is also referred to as a trade, assumed, or fictitious name. Individuals or business owners that want to protect their personal information often look towards a DBA when transacting.
In the state of New Mexico, there are no registration requirements for businesses that want to use a DBA. Therefore, there is also no method by which business owners can register a DBA with the state.
It is important to recognize that using a DBA in the state of New Mexico could have legal implications. Therefore, it’s advisable to discuss this with your attorney prior to proceeding.
An alternative way to operate or transact under a different business name is to register it as a reserved name with the state. This would allow you to conduct limited operations such as opening a bank account under that name; however, it’s not a long-term solution as reserved names expire after 120 days.
2. Nominate a registered agent
Registered agents are essential parts of New Mexico corporations. Their primary role is to receive service of process, compliance documents as well as government correspondence on the New Mexico Corporation’s behalf.
Therefore, the registered agent, also known as a statutory or resident agent should meet a few requirements prior to you nominating them as a corporations agent:
- The New Mexico registered agent must be of the legal age
- The New Mexico dates and agent must maintain availability during usual business hours to ensure that they are able to accept compliance documents
- The New Mexico registered agent must have a New Mexico address where business activities are conducted
The New Mexico registered agent must consent to the appointment
3. Appoint initial directors at the organizational meeting
The next in the process of forming your New Mexico corporation is calling an organizational meeting. The organizational meeting will need to be held prior to filing the Articles of Incorporation.
Additionally, the purpose of the organizational meeting is to create and approve bylaws, determine your company’s share structure, execute and incorporate a statement and select initial directors or Board of Directors.
Every New Mexico corporation will need to appoint at least one corporate director who will oversee the operations of the corporation. The corporate director will serve until the first shareholder meeting is held.
The corporate director has a responsibility to oversee the adoption, amendment, and repeal of the bylaws, as well as the election, supervision, and removal of corporate officers.
4. File Articles of Incorporation
The New Mexico corporation is not legally formed until the Certificate of Incorporation or Articles of Incorporation have been filed. The article is a document that officially creates your corporation and may be filed, by mail, or in person with the New Mexico Secretary of State.
The Articles of Incorporation will need to include some basic information pertaining to your corporation, such as:
- Your New Mexico corporation’s name
- Your New Mexico corporation’s street address
- Your New Mexico corporation’s statement of purpose
- Your New Mexico corporation’s registered agent’s name and address
- Your New Mexico corporation’s duration
- The number of authorized shares your New Mexico corporation is permitted to issue
- Your New Mexico corporation’s names and addresses of corporate directors
- Your New Mexico corporation’s names and addresses of incorporators
Additionally, you should note that the Articles of Incorporation Form issued by the Secretary of State may only be used to start a corporation with one share class. In the event your New Mexico corporation needs a multiple share structure, you may compose your own articles or alternatively attach a schedule to the form.
Once you’ve gathered the relevant information, go ahead and file the articles via mail or in person at the following made address:
New Mexico Secretary of State
Business Services Division
325 Don Gaspar, Suite 300
Santa Fe, NM 87501
5. Create and approve bylaws
The corporate bylaws are an essential and relevant part of your formation documents, although they do not need to be filed with the state of New Mexico. Essentially the bylaws are simply a collection of rules and policies that outline how your corporation is going to be operated and overseen.
You can think of it as a Constitution for your company. The bylaws clarify the rules and regulations of the corporation so that everyone in the organization is on the same page.
Additionally, the corporation’s bylaws must supplement these rules stipulated by the federal government or the state of New Mexico.
Your New Mexico corporate bylaws must contain the following information:
- The process of governing the corporation
- The roles and responsibilities of the board of directors, including corporate officers
- The process of holding annual meetings
- The process of conducting voting procedures
- How corporate officers and directors are going to be elected
- How corporate records will be stored and maintained
- How company disputes will be handled and resolved
- The process of creating, adding, or amending bylaws in the future
- The date of the annual shareholder meeting
- How contracts will be negotiated
- What constitutes a quorum for voting purposes
- Fiduciary duties to the corporation
You are free to use the following bylaws templates to customize your New Mexico corporate bylaws as you see fit.
6. Select a share structure
A share of stock is essentially the unit ownership of a corporation. Each share of stock, therefore, represents the percentage of ownership of the corporation.
So if your New Mexico corporation issues stock or issues one share of stock to a stock owner or shareholder, then a hundred percent of the corporation is then owned by that specific shareholder.
Additionally, shares may be structured into classes, with each class known as a share class holding a different set of rights and privileges. A corporation may have multiple classes, and each class can hold any number of shares.
7. Obtain an EIN
EIN is short for Employer Identification Number. This Employer Identification Number is assigned to business entities in every state by the federal government. It’s essentially used as a way of identifying businesses in each state. You can think of an EIN as a Social Security number for your company.
When you obtain your EIN, you’ll be able to take advantage of the following benefits:
- Opening a business bank account for your New Mexico corporation
- Submitting paperwork for tax purposes on both the federal and state levels
- Hiring employees for your New Mexico corporation
In order to apply for and obtain an EIN, you need to submit an application online on the IRS website. The application is 100% free of charge by New Mexico corporations after forming the company.
Alternatively, if you would prefer to have the application mailed to the Internal Revenue Service, go ahead and download the IRS Form SS-4 and submit it to the Internal Revenue Service at the following address:
Internal Revenue Service
Cincinnati, OH 45999
8. File New Mexico state taxes
Depending on the type of business or type of corporation you’re forming, your New Mexico corporation may be liable for one or more of the following corporate taxes aside from federal tax:
- Corporate income tax: New Mexico corporations are liable for corporate income tax. This applies to the traditional or default corporation structure, which is the C corporation.
- Franchise tax: New Mexico also has a franchise tax applicable to traditional corporations as well as S corporations. The franchise tax is a flat annual fee of $50 that must be paid by all types of corporations in the state of New Mexico aside from nonprofit corporations.
- Employer taxes: All New Mexico corporations that have staff working for them or plan on hiring employees will need to register for New Mexico employer taxes via the New Mexico Taxation and Revenue’s website.
- Sales tax: Corporations in the state that are selling physical products need to register for a seller’s permit via the New Mexico Taxation and Revenue’s website. When you register, you’ll receive a certificate allowing your corporation to collect sales tax on applicable goods.
9. New Mexico business licenses and permits
Irrespective of whether your New Mexico corporation is a large or small business; you may need to apply for certain licenses and permits to legally offer your services in the state:
- Business license: The state of New Mexico does not have a general business license.
- Professional license: If you’re running a professional corporation and offering services such as plumbing, electrical contractors, barbers, cosmetologists, etc., you need to obtain a professional license first before offering your services in New Mexico.
- Sellers permit: The seller’s permit is the only state-level permit or license in the state of New Mexico. It’s often referred to as a gross receipts tax registration and is applicable to your new business if you are engaged in business in New Mexico or plan on selling taxable services or goods in the state. Visit the New Mexico Taxation and Revenue Department in order to register for your gross receipts tax.
10. Annual report requirements in New Mexico
New Mexico corporations are required to file both an initial report as well as a biennial report. The initial report is due within 30 days of your corporation receiving its Certificate of Incorporation. The biennial report is due every other year to confirm or update the same information that you provided in your initial report.
11. Costs of starting a corporation in New Mexico
The filing fees below apply to all New Mexico corporations:
- Name reservation: $20
- DBA name: N/A
- Articles of Incorporation: $100
- Annual report: $25
- Initial report: $25
- New Mexico Certificate of Good Standing: $25
Next steps after forming a corporation
After putting in the time and effort to file the relevant paperwork and get your New Mexico corporation formed, it’s time to start thinking about protecting your growing business.
Protect your business and personal assets
One of the best ways to have personal liability protection is to have a dedicated business banking account and dedicated business credit cards for your New Mexico corporation.
To open up your business bank account, you’ll need to take your company’s formation documents along with your EIN number to the bank.
Additionally, consider taking a business credit card out to help build your corporation’s credit score and obtain more business loans and higher credit limits as and when needed.
A C corporation or a C Corp. is considered a separate legal entity from its owners. Additionally, corporations have many of the same rights and responsibilities as individuals under the law, meaning that they can enter into contracts, hire employees, loan and borrow money as well as own assets and pay taxes.
Both have advantages and disadvantages; however, while a limited liability company separates the business entity from the person, thereby offering you liability protection, a sole proprietorship doesn’t protect your personal assets as there is no liability protection.
There are many states with attractive business laws and benefits that make forming a corporation worthwhile. However, the best state to start a corporation in is the state in which you’re located and plan on doing the most business.
The requirements vary from state to state. However, most states require corporations to file annual reports and other annual paperwork.
Corporations in New Mexico must file Form CIT-1 each year which is the New Mexico Corporate Income and Franchise Tax Return. The filing is due on the 15th day of the month following the close of the tax year.