If you’re starting your own business in New Mexico, you may want to make it a corporation. A corporation is considered a separate entity from its owners. For that reason, the personal assets of its shareholders are protected.
If you choose this route, you’ll have to decide which type of corporation you’d like to start. You have a few choices, and each has positives and negatives.
- A C corporation is the most common form of corporation. A C corporation can offer benefits to its employees that are tax deductible. On the flipside, C corporations are taxed twice. Not only are they taxed as a corporate business, but shareholders (the owners of the corporation) also have to include their share of profits on their personal tax returns.
- An S corporation is actually a tax status that a C corporation applies for, which requires more paperwork. It can only have 100 members or fewer. However, a method called “pass-through taxation” allows the shareholders of an S corporation to avoid paying corporate business taxes. They only pay taxes on their profits from the company on their personal tax returns.
- A Nonprofit corporation doesn’t make money for itself. Its purpose is to benefit society in some way. A nonprofit corporation can apply to the IRS to be exempt from federal taxes. However, the nonprofit must adhere to strict regulations to maintain this status. Anyone employed by the nonprofit still pays the usual taxes on their wages.
How do I form a Corporation in New Mexico?
Steps to form your New Mexico Corporation
- Name Your Corporation
- Appoint Directors
- Choose an New Mexico Registered Agent
- File the New Mexico Articles of Incorporation
- Create Corporate Bylaws
- Draft a Shareholder Agreement
- Issue Shares of Stock
- Apply for Necessary Business Permits or Licenses
- File for an EIN and Review Tax Requirements
- Submit your Corporation’s first report
To start a corporation in New Mexico, you must file the Articles of Incorporation with the Secretary of State.
To simplify forming a corporation in New Mexico, we’ve put together 10 easy steps:
Step 1: Name Your Corporation
If you want your corporation to stand out from the rest, you should give it an original name. You can check if a name is available on the Corporations and Business Services website for the New Mexico Secretary of State.
Although New Mexico doesn’t require you to reserve a name for your corporation if you file the Articles of Incorporation, it’s still good to do so. You don’t want to start advertising your upcoming company to discover you can’t secure its name. You can reserve your corporate name for 120 days by mailing the Application for Reservation of a Domestic Profit Corporate Name with a $25 fee to:
New Mexico Secretary of State Office
325 Don Gaspar, Suite 300
Santa Fe, New Mexico 87501
A few rules for naming a corporation include:
- The name has to have the word “Corporation,” “Incorporated,” “Limited,” or “Company,” or an abbreviation of one of these words.
- The name can’t suggest it might be part of a government agency.
- The name can’t suggest that the business offers services that it does not. For example, if your corporation doesn’t do banking, you can’t include the word “Banking” in its title.
- The name can’t suggest that you do anything illegal.
It’s also a good idea to reference existing trademarks when coming up with your corporation name. You can look at the United States Patent and Trademark Office (USPTO) website to determine whether your name is infringing on someone else’s trademark at the federal level. You can also search New Mexico’s trademark database to ensure a similar mark hasn’t been registered there. Visit the trademark section of New Mexico’s Business Portal for information on applying for a state and/or federal trademark.
When comparing the trademark registration levels, it’s often easier and quicker to file at the state level, but the federal level can provide broader protection, which is useful if you plan to do business outside of New Mexico.
Most states require you to file a “doing business as” (DBA) name (also known as a trade name or fictitious name) if you want to do business under a different name than the one your corporation is legally registered as. However, New Mexico has no DBA registration in place at this time. If you want to operate under a different business name, consult an attorney to see what your options are.
Step 2: Appoint Directors
When you start your New Mexico corporation, you’ll have three types of people involved. There will be:
- Shareholders (owners) provide funds for the company by purchasing stock in it.
- Incorporators file the paperwork to launch the business. This could be you, a lawyer, or someone with a business formation service.
- Directors manage the day-to-day business of the corporation.
Plan a meeting to decide on a board of directors to run your operations. You can even choose yourself.
Although incorporators, shareholders, and directors have different duties, it is legal for an incorporator also to be a shareholder, director, or all three.
A New Mexico corporation must have at least one director named in its Articles of Incorporation. There are several regulations regarding the appointment and function of directors. Some jobs that your board of directors will be responsible for include:
- Approving bylaws
- Electing officers
- Making decisions about business practices
Step 3: Choose a New Mexico Registered Agent
As a New Mexico corporation, you must decide on a registered agent to receive important communications from the government as well as legal notices, such as service of process (notification of a lawsuit). A registered agent can be someone who is involved in your business or even yourself. But if you’d rather hire someone outside your business, that’s OK, too — it’s often even preferable.
Your registered agent must be an individual who is a resident of New Mexico or an entity commissioned to do business in the state of New Mexico. Here are a few other things to keep in mind:
- You must include the name and location of your registered agent in your corporation’s formation documents.
- If you decide to change your registered agent, you will have to file for a new one using New Mexico’s business services portal.
- The physical address for the registered agent’s office must be located in New Mexico.
Step 4: File the New Mexico Articles of Incorporation
After identifying the key figures in your corporation, the next step is to file your Articles of Incorporation. In some states, this document is known as a Certificate of Incorporation. Both titles mean the same thing.
You’ll need to file your Articles of Incorporation with the New Mexico Secretary of State Business Services Division, and you’ll need to include:
- The name and address of your business
- The overall number and type of shares your company can give out
- Your business purpose and whether you choose to be a benefit corporation
- Your period of duration
- The name of your registered agent and the registered office address
- Your principal place of business
- The mailing address of your corporation
- The name and address of the initial board of directors
- The name and address of each incorporator, including their signatures
- A name, address, and signature for every incorporator involved in your business
- A statement of acceptance for the registered agent, consenting to the appointment
You can file your Articles of Incorporation online through the New Mexico business services portal, or you can mail this document to:
New Mexico Secretary of State Office
325 Don Gaspar, Suite 300
Santa Fe, New Mexico 87501
Note that New Mexico is unusual in that the filing fee is a minimum of $100 and a maximum of $1,000 since it depends on the number of authorized shares. For the first 100,000 shares, the fee is $100. After that, the fee increases by $1 per 1,000 shares, not to exceed $1,000.
Step 5: Create Corporate Bylaws
By creating bylaws for how your company should operate, you’ll let everyone involved know what’s expected of them. Corporate bylaws are not only required in New Mexico, but they can help your business run smoothly. They’re also considered legally binding and can help protect a corporation in a legal dispute.
Here’s a list of items you may want in your corporate bylaws:
- A list of your board of directors with their expertise and duties
- Details about any committees
- Rules for conflicts of interest
- The business purpose
- An index of scheduled meetings throughout the year
- Goals for everyone in the company
- Management and duty structure
- Procedures for replacing board members
- How shares are distributed and how the stock is sold or transferred
- Amendment voting rules
Keep your corporate bylaws in a secure place so that you can reference them whenever you need.
Step 6: Draft a Shareholder Agreement
A shareholder agreement lays out the rights and responsibilities of the shareholders. This document will outline the commitment you expect from your shareholders and the powers they can expect to enjoy. Your shareholder agreement should cover:
- What actions shareholders can take on behalf of the company
- The shareholders’ responsibilities
- The shareholders’ names and contact information
- Financial commitments
- The process for conducting votes
- How the agreement can be changed
- Time obligations
- Any rights current shareholders have for purchasing stock before it’s made available to others
- How stock is sold or transferred
- How dividends are split up
- A plan for assets in case the business closes
Step 7: Issue Shares of Stock
Before you can start your corporation, you must issue stock. First, you’ll want to figure out how much capital you’ll need to start your corporation. When you do, divide that number into stock shares and divide them among your company’s shareholders. Shares can be traded or sold.
You can privately issue stock to founders, employees, private investors, and others or you can publicly issue stock that the general public can purchase. If you issue stock publicly, you’ll have to file quarterly reports with the U.S. Securities and Exchange Commission (SEC).
You’ll have to include a record of each share you issue in your biennial report, so it’s also important to keep track of them in writing.
We suggest studying New Mexico’s rules for issuing stock to get a better understanding of the process.
Step 8: Apply for Necessary Business Permits or Licenses
New Mexico doesn’t require a general business license on the state level, but some counties and cities may require one. The other types of licenses and permits needed vary a great deal from business to business. Some different licenses you might need are:
- Zoning permits to do business in certain areas
- Service licenses for professionals like doctors or lawyers
- Occupational licenses to sell certain products like tobacco
We recommend that all new business owners do their research to ensure they have the right business licenses and permits at the local, state, and federal levels. You can also hire a business, such as ZenBusiness, to conduct this research for you.
Step 9: File for an EIN and Review Tax Requirements
Much like a Social Security number is unique to an individual with the federal government, an Employer Identification Number (EIN) is used to identify your unique corporation. Corporations are separate legal entities from their shareholders, so they need their own identification numbers.
You can register for an EIN on the IRS website. You’ll get your corporation’s EIN for free after you apply. You’ll need the EIN to file taxes and attain a corporate bank account, so keep it safe.
Similarly, your business will likely need to register with the New Mexico Taxation and Revenue Department in order to get a Combined Reporting System (CRS) Identification Number to pay various state taxes. You can acquire the CRS online or fill out form ACD-31015 and send it to any local tax office.
Your corporation will be responsible for paying both federal and state income tax. In addition, New Mexico has an annual franchise tax of $50.
Step 10: Submit Your Corporation’s First Report
New Mexico corporations are required to file an initial report within 30 days of forming, and then they are required to file a biennial report every two years. The biennial report is due the 15th day of the fourth month following the end of your fiscal year.
To clarify, if your company ends its fiscal year in December, the report will be due April 15. If your company ends its fiscal year in June, the report will be due Oct. 15.
Nonprofits have to file a report every year, which must be turned in by the 15th day of the fifth month after their fiscal year ends.
Your biennial report needs to include:
- The corporation’s name
- The state where it was formed (New Mexico)
- The name and address of your registered agent
- The corporation’s address
- Director and officer names and addresses
- Value of all property owned
- Amount of capital paid
- Signature of the person filing the report
You’ll need to file your initial and biennial reports using the New Mexico business services portal with a $25 fee.
How much does it cost to start a corporation in New Mexico?
Several factors can influence the total cost of incorporating in New Mexico. To file your Articles of Incorporation, you’ll have to pay at least $100 and possibly up to $1,000 if your corporation can issue a large number of shares. You’ll also need to pay $25 when submitting your initial report. Some other expenses you might run into are:
- Permit and licensing fees
- Name reservation fees
- Fees for filing amendments
ZenBusiness can help eliminate some of the stress for you. With our annual plans, we can help you stay on top of any required filings in order to keep your New Mexico corporation compliant, so you can relax and focus on growing your business.
What are the benefits of a corporation in New Mexico?
There are many advantages to starting a corporation in New Mexico. When you incorporate in New Mexico, you’ll experience perks like:
- Protection of personal assets (Corporations are separate entities from their owners.)
- Recognition outside of the U.S. as a professional entity
- The ability to issue stock to investors
- Several general industry tax benefits (For example, New Mexico offers a business tax credit for companies that rehabilitate old business facilities.)
- Appearing more established and professional as a corporation
There are a few downsides to starting a corporation, though. C corporations are taxed twice. After you pay your corporate taxes, you’ll still have to include your share of the profits on your personal tax returns.
How is a New Mexico corporation taxed?
The way that a corporation is taxed in New Mexico depends on whether it is a C corporation, an S corporation, or a nonprofit corporation.
A C corporation has to file corporate returns, and its owners also have to report income on their personal tax returns, which means C corporations are double-taxed. However, there are several tax deductions accessible to C corporations. In addition to federal and state income taxes, New Mexico C corporations also pay a $50 annual franchise tax.
S corporations have a pass-through tax structure. Profits from the corporation go straight to its owners’ tax returns. Legally, S corporations are still separate entities from their owners, but pass-through taxation allows them to bypass federal corporate income tax. However, in New Mexico, S corporations still pay the state’s $50 annual franchise tax.
Because nonprofit organizations must provide a benefit to the public, they can apply for tax exempt status from the federal and state government, including New Mexico’s franchise tax. Nonprofits must follow strict regulations to maintain their tax-exempt status.
New Mexico Corporation FAQs
- Does starting a corporation in New Mexico involve more paperwork than starting other types of businesses?
Corporations do require a lot more paperwork and record-keeping than other types of business. They are more difficult and time-consuming to start than business structures like sole proprietorships or limited liability companies (LLCs).
- What is the difference between an LLC and a corporation in New Mexico?
A corporation is owned by shareholders, while an LLC is owned by an individual or a group of people referred to as members. LLCs have a choice; they can be taxed as corporations or partnerships. LLCs also require less effort and yearly reporting to get started.
- How do I change my corporation’s name in New Mexico?
You can change the name of your corporation in New Mexico by filing an Amendment of the Articles of Incorporation with the Secretary of State and paying a $100 filing fee.
- How many people are needed to form a corporation in New Mexico?
A single person can form a corporation in New Mexico.
- Can I form my New Mexico corporation online?
You can form your New Mexico corporation online using the Secretary of State’s business services portal.
- How do I dissolve my New Mexico corporation?
To dissolve your corporation, you will need to file a Statement of Intent to Dissolve and the Articles of Dissolution with the state.
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