How To Efficiently Form An LLC In New Mexico

One of the most important government positions a prospective LLC owner should be aware of is the Secretary of State. They and their department are responsible for managing and administering LLCs and other types of businesses within the state. The Secretary of State for New Mexico is Maggie Toulouse Oliver and her department is where LLCs will submit their articles of organization.

What is an LLC?

An LLC or limited liability company is a type of business entity that is available in the US. This business entity is particularly popular amongst entrepreneurs because of its ability to provide limited liability asset protection while also being easy to establish and maintain. This is particularly true in comparison to other business entities such as a C corporation which also provides limited liability.

Limited liability means that the liabilities of the business are limited to the assets of the business. As such, if the business runs into debt or bankruptcy the creditors of the business are not able to "pierce the corporate veil" and pursue the business owners for their debt. In the same vein, if a business owner runs into debt in a personal capacity the assets of their business cannot be used to pay their personal debts. This provides two-way protection for a business and a business owner and helps to mitigate some of the risk associated with forming a business.

How to Efficiently Form a New Mexico LLC

There are five important steps to form an LLC in New Mexico. Each step is just as important as the last and all of them should be complete in order to create an LLC.

1. Name the LLC

While this may seem obvious it is in fact one of the most important steps in the process of starting an LLC. Like most other states, New Mexico has certain requirements that must be met in order to name an LLC. The name of the business must include "limited liability company" or one of its many abbreviations. The name may not include words which could confuse it with a government agency. Additionally, if the name includes words such as bank, additional documentation will need to be completed. It is also imperative to check that the name of the LLC has not already been taken by another company. The final step in the name creation process is to check whether the .com URL for the business name is available or not.

2. Choose a Registered Agent

A registered agent is the person or business that acts as the point of contact between the LLC and the state. They receive important documentation on behalf of the business such as service of process notices and tax documents. Every LLC in the state is required by law to have a registered agent. This obligation can be performed by an employee or owner of the LLC but it cannot be performed by the LLC itself. The registered agent must have a non-PO Box address within the state of New Mexico. In addition to this, the agent is expected to be available every business day of the year to receive documentation. It is for these reasons, and several others, that it is recommended that businesses use a registered agent service to fulfill this obligation for them.

3. File the Articles of Organization

In order to officially register an LLC, the owners must submit the Articles of Organization with the Secretary of State. This process can be completed online for added convenience. In addition to this form, an LLC must sign a Statement of Acceptance of Appointment by Designated Initial Registered Agent which has to be signed by the registered agent as well. This is also a good time to determine whether an LLC will be managed by its members or managed by its managers.

4. Create an Operating Agreement

This is not a legal requirement in the state of New Mexico but it is best practice to have an operating agreement. This is a document which outlines the ownership of the LLC as well as the operating procedures which the LLC will use. This document ensures that all members of the LLC are seeing eye to eye about the LLC and it can reduce the potential for conflict in the future.

5. Obtain an EIN

An EIN is an Employer Identification Number and it functions like a social security number for a business. These numbers are assigned by the IRS and they are used to identify a business for tax purposes. Any business which wishes to have employees must have an EIN. Additionally, an EIN is required by banks for opening a business bank account which is an essential part of operating a business. A business bank account is also the first step in the process of developing business credit which is vital for acquiring financing for a business. Obtaining an EIN is an easy process that can be fully completed online.

Final Thoughts

This article has outlined the five steps necessary to efficiently establish an LLC in New Mexico. Each step is vital for the formation of an LLC except for step four which is optional but highly recommended. Having an operating agreement in place can reduce strife in a business and ensure that all the members of the LLC are on the same page. Each other step is entirely necessary and cannot be skipped by LLC owners who are looking to establish their LLC as fast as possible. Fortunately, all of these steps can be completed online so an LLC can be established from the comfort of an individual's home.