Before you officially welcome your first client, there are a few important tasks to complete. Forming a New Mexico professional corporation is more complex than other business types, but our step-by-step guide helps ensure you don’t miss a beat.
Is a New Mexico professional corporation structure right for you?
When deciding which business entity is right for you, consider:
- Who your operating members are
- How you want to structure your business
- What tax options are available
PC, PLLC, or LLC?
The newest business entity type, PLLC, isn’t an option yet in New Mexico. This leaves you with a choice between a professional corporation (PC) or limited liability company (LLC). If you don’t need high-level liability protections, a basic LLC may be sufficient. If your members are licensed professionals that require malpractice protection (doctors, lawyers or accountants, for example), a PC is likely best. It is more difficult to operate and subject to heftier taxes, but your practitioners benefit from a corporate organization structure and increased liability protection.
Because a PC consists of shareholders, ownership of the company is based upon the percentage of shares an individual holds. When you start your business, you may determine your percentage of ownership in relation to the initial investment you make. As members join or leave the corporation, you will redistribute shares.
There are three main roles in your new corporation:
- Incorporator: The person responsible for submitting all necessary formation paperwork to the state. Once this is completed, the incorporator’s role is complete.
- Shareholders: Owners who have stock in the company.
- Directors: The team of managers is responsible for organizing daily tasks.
Choose a name
Naming your corporation is both challenging and exciting! You should select something easy-to-read and relevant to your members and mission.
The state requires all professional corporations to include “Professional Corporation,” “Professional Association,” Limited,” or “Chartered” in their name. There is a list of designators allowed by state law, found in the 2019 New Mexico Statutes, Chapter 5. (Citation: NM Stat § 53-11-7 (2019)).
Before you commit to an idea, check the New Mexico Secretary of State’s website for availability. We recommend choosing a name with an available web domain so your business presence remains consistent across platforms.
If you have finally settled on the perfect name but can’t file right away, use our name reservation service to protect it.
Find a registered agent in New Mexico
All New Mexico corporations must maintain a registered agent as long as they are in operation. State law mandates that an agent must:
- Be a business entity or individual with an in-state office address.
- Be available during normal business days and hours
- Accept responsibility for receiving service of process
A shareholder can serve as their own agent, but ZenBusiness’s registered agent service can connect you with a New Mexico professional who can manage everything on your behalf so that you don’t have to sit around the office all day or worry about missing a summons or important legal document.
File Articles of Incorporation
The next step is filing your Articles of Incorporation with the state. Once they are approved, your business will become a legally registered professional corporation. Your incorporator will fill out the forms with basic data, including business name, address, directors, mission statement, and legal guarantees. You will also submit a Statement of Acceptance of Appointment by Designated Initial Registered Agent. There are a number of ways to submit these, so check the state website.
The filing fee in New Mexico ranges from $100 to $1,000 depending on how many shares your corporation authorizes.
Establish a corporate record in New Mexico
It is wise to establish a secure physical and digital space to store important corporate documents. This may be a file cabinet, binder, or organized cloud storage space. Easy access to company records including transactions, decisions, meeting minutes, and legal documents is required by state law and helps your business run smoothly.
Designate a board of directors
You must have at least one director named in your Articles of Incorporation. In addition, you need a team of directors who are responsible for internal organization, ongoing evaluations, and legal oversight. Both incorporators and shareholders can serve on the board.
Create corporate bylaws
As soon as you know who your directors are, it’s time to draft bylaws. These rules will protect your shareholders and business, encourage consistency, and help ensure everyone is on the same page. When brainstorming corporate policies, always be as specific as possible.
Hold your first board meeting
Prepare for your first board meeting to be lengthy, and be sure to keep a detailed written record of the meeting (commonly referred to “taking minutes”), from start to finish to comply with recording-keeping requirements. Your directors will use this time to:
- Appoint officers
- Ratify bylaws
- Discuss tax status
- Outline shareholder agreement
- Issue stock shares per New Mexico law
Fulfill tax obligations
The first step in preparing your New Mexico PC for tax season is registering for an EIN. ZenBusiness has a streamlined tool to make this easier.
As a professional corporation, you will either pay federal taxes as a C corp (standard) or an S corp (requires a special application). C corp shareholders are taxed twice — once on the corporate level and again on the personal level. S corp status prevents double taxation by allowing the corporation to function as a pass-through entity. This means that the PC isn’t taxed at the corporate level because revenue passes to the owners, who pay income tax individually. However, to qualify for the S corp election, you must submit a special application proving you have less than 100 shareholders, no foreign (out-of-state) shareholders, and only one class of stock.
In New Mexico, you pay annual state income tax as well as a corporate franchise tax of $50. To prepare, you can register with the Taxation and Revenue Department and obtain your state ID number.
City, county, or industry-related taxes may be required depending on your location and activities. Conduct a search on the Taxation and Revenue Department’s site or with your local municipality for more information.
Obtain business licenses and permits
Every type of business entity is expected to obtain relevant licenses and permits. The requirements are dictated by your location and business functions. Identifying which licenses you need can be daunting because there is no central location to get information. ZenBusiness’s license report tool eliminates the need for research.
- General: There are no mandatory state licenses in New Mexico, but there may be city or county requirements. Check municipal government pages for more info.
- Industry-specific: Your business may need to apply with the New Mexico Regulation & Licensing Department for financial industry, professional, or environmental permits.
You’ve got a board of directors, incorporated status, and all the necessary permits required to open your doors to the public. It’s time to insure your New Mexico PC. There are a few bases to cover to protect your business and employees if something goes wrong.
Liability: General liability insurance is the first line of defense for any corporation.
Malpractice: This coverage protects licensed practitioners against client claims that indicate error or harm.
Worker’s compensation: If you hire more than three employees, you must obtain worker’s compensation insurance.
To be safe, you should talk with a registered professional to make sure you have all your bases covered.
Open a business bank account
Use your EIN to open an official business bank account as soon as possible. Most banks will ask for a copy of your Articles of Incorporation, bylaws, and a list of signatories, as well.
Ready to Kick Start Your Business?
At ZenBusiness, we are proud to support small businesses through a variety of different tools and services. Whether you need a registered agent service, want to reserve a business name, or looking to register a domain, our goal is to help you stay on the road to success. Check out our services, and contact us today to see how we can help you grow your company.
New Mexico Professional Corporation FAQ
- What are the filing fees for a New Mexico professional corporation?
New Mexico’s filing fee is a bit unusual because it ranges from $100 to $1,000 depending on the number of authorized shares. You will pay $100 if shares do not exceed 100,000. After that, you are charged $1 for every 1,000 additional shares.
- Do I need a lawyer to form a New Mexico professional corporation?
You are not legally obligated to hire a lawyer, but it is wise to do so. A lawyer can review and file your important documents, help draft state-compliant bylaws, and prevent you from making common legal mistakes.
- Does New Mexico have other professional entity types?
Business entities in New Mexico include sole proprietorships, general partnerships, LLCs, and corporations. Because starting a PLLC is not currently an option in New Mexico, a PC is the only professional business entity available. Can professionals from different fields form a New Mexico professional corporation together? All practitioners must hold a license in the same field and agree to solely provide relevant professional services.
- Will I be taxed as an S corp or C corp in New Mexico?
Unless you apply for S corp status in New Mexico, you will be taxed as a C corp. To be eligible for S corp tax breaks, you must have fewer than 100 shareholders, no out-of-state shareholders, and only one class of stock.