Looking for a state off the beaten path to start your business in? New Mexico fits the bill. While the state is not on the shortlist of premier entrepreneur destinations, the Land of Enchantment (New Mexico’s actual official nickname) offers plenty of incentives for aspiring business owners.
For one, there’s the state’s low cost of living, ranked 15th in the nation by U.S. News. Then there’s New Mexico’s low property tax rate, which Tax Foundation ranked the most favorable among the 50 states in their 2020 Business Tax Climate Index. These conditions lighten the expense burden for small businesses, which may be the reason New Mexico’s startup early survival rate of 79.55% is above the national average.
New Mexico’s otherworldly natural beauty is the icing on the cake: the state is home to many national and state parks, such as Carlsbad Caverns National Park and White Sands National Monument, that feature landscapes unlike any other in the country. It is the Land of Enchantment, after all.
To help you in your budding venture, we’ve produced the definitive guide to starting a business in New Mexico, which will walk you step-by-step through all the important aspects of getting a business off the ground in the state. We also provide lists of helpful entrepreneurial resources and funding sources to increase your odds of success.
New Mexico small business statistics at-a-glance
- 154,257 small businesses are active in New Mexico, accounting for 99% of the state’s total businesses.
- 339,640 New Mexico residents are employed by small businesses, which is 54.2% of the state’s workforce.
- 60,595 small businesses in New Mexico are minority-owned.
- The healthcare and social assistance industry is the leading small business employer in New Mexico, followed by accommodation and food services, and construction.
- 79.55% of New Mexico businesses survive their first year of existence.
- New Mexico startups create an average of 4.07 jobs in their first year.
- New Mexico’s rate of new entrepreneurs ranks fifth in the nation.
- The state’s property tax rate was ranked 1st in the nation by Tax Foundation, while its unemployment insurance tax ranked 8th.
Starting a business in New Mexico in 12 steps
1. Develop an idea
Every successful business starts with a good idea. Ask yourself these questions:
- Which product or service can your business provide that doesn’t already exist on the market?
- How does your business idea refine an existing product or service?
Determine your personal strengths and interests: developing an idea that suits your personality and positive traits will provide motivation to put in the long hours necessary in addressing the myriad challenges you’ll face in getting your business off the ground.
Figure out how to market your expertise: if your business idea is not something you totally believe in and can sell effectively, it will be much harder to succeed.
2. Do the research
Once you have an idea, it’s time to put it through the wringer and decide if it’s viable in the market. Conduct market research to arrive at answers to these key questions:
- Is there a demand for your product/service in New Mexico?
- Who is your target market?
- Do existing businesses in New Mexico offer a similar product/service?
- What makes your business unique compared to the competition?
Coming up with satisfactory answers may require refinement, or even a total overhaul, of your original idea. Be patient: you’ll only want to proceed with the next steps after determining that a niche exists in the New Mexico market for your business idea.
3. Draft a business plan
Now it’s time to write the blueprint of your business. A great business plan should chart the path of your company from infancy to success while being able to attract investors to provide financing.
Your business plan ought to include the following sections:
- Executive summary – An overview of your business and why it will be successful
- Description of business – Explain the advantages of your business and the problems it solves
- Market research – Provide research on your industry, target market, and potential competitors
- Organization and staff – Detail the nuts and bolts of your business; how it’s structured and who will run it
- Product or service description – State what you are selling or offering
- Marketing plan – Explain your strategy for attracting customers
- Fundraising – The money you’ll need in the next five years to grow your business and how you’ll spend it
- Financial forecast – Data and balance sheets providing a financial forecast for your business
- Appendix – An optional section with supporting and/or requested documents like resumes, letters of reference, permits, etc.
4. Secure funding
Every business needs money to get off the ground. In fact 82% of businesses that fail do so because of a lack of cash flow, U.S. Bank found in a recent study. Your business plan should include a detailed estimate of the funds you’ll need to cover expenses for at least a year, so now it’s time to acquire the money.
If you aren’t wealthy enough to self-fund your business, you can choose from a number of other funding options. These include a loan from the U.S. Small Business Administration, taking out a loan from a commercial bank, launching an equity crowdfunding campaign, or securing funding from an angel investor or venture capitalist group active in New Mexico.
An angel investor is a wealthy individual who invests their personal finances in a startup, typically in the beginning stages, whereas a VC is a group of investors that will fund a business throughout its existence.
Which route you choose depends on the specifics of your business: angel investors typically invest smaller sums to help get a startup off the ground, while VCs invest larger sums of money in exchange for a greater say in the operations of a business. Smaller startups usually opt to pursue funding from angel investors. Plenty of both types of investors are operating in New Mexico.
New Mexico Angel Investors and VCs
- New Mexico Angels – One of only a few groups of individual accredited angel investors operating in the region. Boasts over 20 years of experience in investing in early-stage companies.
- NMA Ventures – A recently established venture capital firm dedicated to funding early-stage high-technology companies based in the state.
- Verge Fund – An Albuquerque-based VC fund focused on boosting New Mexico’s reputation as a hub of technological innovation.
- Tramway Venture Partners – A young venture capital firm specializing in funding health care and biotech startups in New Mexico.
Additional Investor Resources
- AngelList: New Mexico Angel Investors – An exhaustive listing of 4,927 angel investors seeking funding opportunities in New Mexico.
5. Decide on a legal business entity
The form of business entity you choose will affect many factors going forward. There are 3 main options to decide from:
- Sole proprietorship – The name for running a business by yourself. Legally, you and your business are one and the same, with no separate legal entity for your business. A partnership is legally identical to a sole proprietorship, except that it comprises two or more people.
- Corporation – A complex legal structure that is a separate entity (providing legal protection to owners) from the owner and comprises directors, officers, and shareholders.
- LLC – AKA “Limited Liability Company”, this is a hybrid entity between a sole proprietorship and a corporation that possesses advantages of both. An LLCs provides the liability protection of a corporation, yet isn’t subject to double taxation as the profits go through your personal tax return.
Nowadays, LLCs are the option of choice for small business owners as they are easy to manage and provide the benefits of a corporation while lacking their complex structure. Taxwise, they operate more like a sole proprietorship.
You may want to consult with an attorney to help decide which entity works best for your business.
6. Register your business
After deciding on a business entity, you may go ahead and register your business with the state of New Mexico. This process varies depending on whether you are forming a sole proprietorship, LLC or corporation.
For sole proprietorships
Running a sole proprietorship does not require you to make any special filings with the state government. In most states, those using a business name separate from their legal name are required to obtain an assumed name certificate, however, New Mexico doesn’t provide a clear cut path for fulfilling this obligation.
Regardless, it’s a good idea to choose a business name that is distinct from others operating in the state. Use the New Mexico Secretary of State Business Name Search to confirm that your chosen business name, or one similar to it, is not already in use in the state. You can also register your business name as a trademark if you so choose. The registration fee starts at $50.
For LLCs and corporations
Creating either of these two entities in the state of New Mexico follows a similar process. The first step is appointing a registered agent to handle process notices and other government correspondence on your business’s behalf. This is a mandatory requirement in all 50 states. You can appoint yourself as a registered agent if you have a physical address in the state, however, hiring a professional service is cheap ($50-$200 a year) and ensures that paperwork is filed properly.
Next, perform a business name search to confirm that your chosen business name is available in the state. If the name is not already in use, you are free to file the documents to form your LLC or corporation in the state.
To form an LLC in the state, you must file Articles of Organization online after creating a user account with the Secretary of State’s business registration portal. The filing fee is $50.
To form a corporation in New Mexico, you must file Articles of Incorporation. This can be done through the mail, or in-person at the Secretary of State Office. The filing fee is $100.
7. Acquire federal and state tax IDs
Now you should obtain a Federal Employer Identification Number (EIN), which is like a social security number for a business and allows you to open bank accounts, handle payroll, and file taxes.
Each state has its own laws and taxes regarding businesses. Visit the New Mexico Department of Taxation & Revenue Businesses Portal for instructions on how to register and file taxes online in the state.
8. Open business banking and credit accounts
Opening a bank account for your business is crucial because it allows you to separate company assets from your personal assets, and makes filing taxes a lot easier. This is a recommended step, even if you are operating a sole proprietorship.
It’s also a wise idea to obtain a credit card for your business because it will help you isolate business expenses and build up credit for your company, which may help in securing investment in later stages.
Banks operating in New Mexico good for small businesses
- New Mexico Bank & Trust
- New Mexico | Pinnacle Bank
- Washington Federal
- First American Bank New Mexico
9. Get the necessary licenses and permits
Depending on the type of business you are opening, you may need to apply for a number of permits and licenses to operate legally. For example, a restaurant will need a liquor license, and a pawn shop will need a reseller’s license. The paperwork may prove a hassle, but it’s a necessary ordeal that will protect you from fines, lawsuits, and other legal hazards.
New Mexico does not issue a general business license, but many types of businesses require a specialty license or permit to operate legally in the state. Visit the New Mexico Regulation & Licensing Department for links to the state agencies in charge of issuing licenses for a number of professions. Online application is available for most licenses.
You should also contact your local county clerk’s office for information on local regulations and zoning restrictions regarding businesses in your municipality.
10. Choose a location
Whether you are running an online business or opening a restaurant, location is everything. Be aware of the demographics of the neighborhood or town that you are considering: Are the local residents likely to visit your business? Will nearby competitors take a share of your potential profits?
State capital Santa Fe is our pick for the best city to start a business in New Mexico. The cost of living is slightly above the national average, but lower than those of most communities its size. Santa Fe boasts a well-educated populace thanks to the nearby presence of the Los Alamos National Laboratory, and a strong tourism sector due to the city’s unique architecture, and the beauty of the surrounding area.
11. Get insured
No matter what type of business you form, buying insurance coverage to protect yourself in the case of property damage or legal action is a good idea. In fact, businesses with employees are required by the federal government to have two types of insurance, while others are strongly encouraged, or required at the state level, depending on your business type. Consult with a licensed insurance agent to find out which types of insurance you should get.
Required forms of insurance:
- Workers’ compensation: Covers medical costs and disability benefits if an employee is injured or becomes ill on the job.
- Unemployment insurance: Provides benefits to workers after a loss of job through no personal fault.
Recommended forms of insurance:
- Professional liability insurance: Covers losses as a result of property damage, medical expenses, libel, slander, and negligence claims.
- Commercial property insurance: Covers property damage to business owned properties and possessions as a result of fire, theft, or storm.
- Disability insurance: Provides short-term benefits for employees suffering an illness or injury. Required in certain states such as California, New York, and Hawaii.
12. Develop an internet presence
Establishing an identity on the web is an important investment in a business’s future development. Here are some key steps in the process:
- Register a domain name for a company website (You can use domain.com, Bluehost, GoDaddy.com, Namecheap.com). Design the website and fill it with content.
- Create profiles on the popular social media services (Twitter, Facebook, Instagram)
- Register a Google profile for your business
- Create accounts on review sites such as Yelp, Google Reviews, and TripAdvisor
New Mexico small business resources
- New Mexico Secretary of State: Business Services – Register your business with the state.
- New Mexico Department of Taxation & Revenue: Business – Register your business to file and pay applicable state business taxes.
- New Mexico Regulation and Licensing Department – Apply for one of many available specialty licenses and permits you may need to do business in the state.
- New Mexico Small Business Development Center – A statewide organization dedicated to aiding entrepreneurs in the state through free counseling and connection to funding sources.
- ABQid – A nonprofit based in Albuquerque that sponsors accelerator programs for local
- WESST Enterprise Center – A downtown Albuquerque business incubator that provides a variety of services and facilities for resident businesses.
- Santa Fe Business Incubator – An affordable incubator and coworking space that recently opened a BioScience Lab to support startups in the fields of science and technology.
- San Juan College Enterprise Center – An incubator affiliated with San Juan College that also offers co-working space for businesses that are not part of the program.
- The BioScience Center – A vast 19,500 square foot bioscience and life-science startup incubator located in Albuquerque.
- Albuquerque | SCORE – The Albuquerque chapter of the nation’s leading business mentoring network.
- Santa Fe and Northern NM | SCORE – SCORE’s chapter covering the northern region of the state, which has been repeatedly recognized for its excellence.