New Mexico is a beautiful place to live — and a great place to do business. With a low cost of labor and great economic growth prospects, the state has many business-friendly attributes.
Do you dream of starting your own company? This guide can help you learn how to start a business in New Mexico, from the initial planning stages to forming your business entity, to building the company of your dreams!
Decide on a business idea
First and foremost, you’ll need to decide what kind of business you want to start. Chances are you already have something in mind, but if not, here are some things to consider:
- What are you talented or naturally skilled at? Could this talent make you well suited to a certain type of business?
- What business does your community need? Have you talked to people to find out?
- What are you interested in? Can you combine any of your passions with a business idea?
- Is this going to be a full time business, or more of a side hustle?
These are questions to ask yourself when deciding on a business idea. Once you have decided, move on to the next step.
Plan your New Mexico business
Now it’s time to start planning. This means coming up with a business plan, naming your business, researching locations, and more. There’s a lot to cover here, so let’s break it down:
Select a business name
Deciding on a name for your New Mexico company comes next. This is a very important step, so take your time.
Ideally, you will want to find a name that is appropriate for your business/industry, and memorable for your future clients or customers. It also must be unique, meaning distinguishable from other names of businesses already registered in the state of New Mexico.
To see whether or not a name is available, you can conduct a New Mexico business name search online with the NM Corporations Division. This will show you businesses that are already registered so that you can determine if your desired name is available.
The requirement to use a unique name is one of the main NM business name rules – but it’s not the only one. There are other important rules to consider, including:
- Names for LLCs need to contain “limited liability company”, or select approved abbreviations such as “LLC” or “L.L.C.”
- Names for corporations need to contain “corporation”, “incorporated”, or select approved abbreviations such as “corp” or “inc”
- Other rules may apply.
When you find an available name that you’re happy with, you can move on to the next step in this guide. Or, if you want some time to think about the name, you can reserve the name for 120 days by filing a form.
New Mexico trade names
New Mexico does allow companies to use trade names, otherwise known as alternate names or DBAs. Trade names can be registered once your business entity is formed, and can then be used to do business under (providing flexibility in marketing and branding efforts). Learn more here.
Register a domain name
Once you choose a name, you should immediately register a domain name for your new business. In most cases, getting a .com domain name is ideal, but there are many other extensions (.biz, .net, etc.) that are worth considering.
You can use a tool like Namechk to search for an available domain name and find a great deal on the registration cost. You may find that your desired names are taken, so you may need to get creative.
Complete market research
Once you have an idea, you’ll want to do some market research. You want to gain a better understanding of who your customers – and competitors – are. You can achieve this by conducting online research, running focus groups, sending out surveys, and more. There are also companies that can help you complete market research, for a fee.
Select a business location
Unless you plan to run a remote/virtual business, you will need to find a physical location for your company. Research commercial property in your area, and take note of typical costs. For customer-facing businesses (retail and some services), location is very important, so take your time in selecting the right area for your business.
Create a business plan
You will now need to create a detailed business plan for your new venture. This plan is helpful for your own purposes, and will also be necessary in order to obtain funding from a bank. A good business plan should contain these elements:
- Finances: How much funding does the business need to get started? How many sales does it need each month to break even on expenses?
- Product: What do you plan to sell? Is it a product or a service? What problem does your business solve, and how is it distinct from your competitors?
- Marketing: How will you drive sales? What marketing and sales efforts do you plan to employ? How much money will you set aside to fund marketing efforts?
- Staff & partnerships: How many people will you need to hire, and what skill sets do they need to have? Will you have any partnerships or arrangements with other local businesses?
If you need help, you can find business plan templates online that will help walk you through the steps you need to take to draft a detailed business plan. If you plan to seek funding, you may also wish to call your bank to see what they require in terms of business plans.
Decide on a business structure
Before you form your business as a legal entity, you will need to decide which business structure you will use. There are a few different types of businesses, each with its own pros and cons.
Sole props are single-person operations. Examples include freelancers, gig economy workers and consultants. A sole proprietorship business is very easy and inexpensive to form, and tax reporting is also fairly simple. As a sole proprietor, your business taxes are reported as part of your personal tax return.
The downsides to a sole prop are that you cannot hire employees, and you don’t have the legal liability shield that something like an LLC or corporation would provide. 100% of the debts and liability of a sole proprietorship go to the sole owner: you.
A general partnership is an unincorporated business structure similar to a sole proprietorship, except with two active owners/participants. Partnerships do not have liability protection.
Limited liability company (LLC)
A limited liability company, or LLC, is a popular choice for business owners because it provides liability protection to the owners. It separates the business from the owners, which means the personal assets of owners will not be at risk if the company gets sued or goes into bankruptcy.
LLCs are also a bit easier to form than corporations. Even so, there is definitely more work involved with an LLC than there is with a sole proprietorship.
A corporation is owned by its shareholders, and is a separate entity. There are a few different types of corporations (C-corp, S-corp, etc), with the main differences being the way they are treated tax-wise.
Corporations are more regulated than LLCs, which makes them more attractive to outside investors. For this reason, most large companies are corporations. The downside is that it takes more effort, and more paperwork, to form a corporation.
A nonprofit is a legal entity that is set up with charitable status, meaning that its goal is not to make a profit, but rather to address a certain cause. Nonprofits are funded by donations, rather than investors, and are subject to many regulations. They are exempt from most forms of taxation, although tax returns must still be filed.
Register your business in New Mexico
Now it’s time to actually establish the legal entity of your business. The specifics depend on whether you’re forming an LLC, corporation, or other business entity – but for the most part, you will need to submit documents to the New Mexico Secretary of State.
The basic steps typically include:
- Naming your company
- Choosing a registered agent (this individual or company is responsible for receiving legal documents on behalf of the business)
- Filing paperwork with the state
- Obtaining business licenses and permits if necessary
- Applying for an EIN from the IRS
You can choose to do the work yourself, or use a paid service. For many entrepreneurs, using a service is worth the cost, as it allows you to save a lot of time and hassle. These services walk you through each step you need to take, ensuring that the entire process is handled efficiently and accurately.
If you would rather do the work on your own, the basic steps for each popular business entity are listed below.
Form a New Mexico sole proprietorship
Follow these steps:
- Decide if you will operate under your legal name, or use a trade name
- If you use a name other than your own, you may need to register a trade name name
- Apply for a business license and/or other necessary permits from local governments (city/county), as needed
Form a New Mexico LLC
Follow these steps:
- Name your new LLC (see notes above)
- Choose a New Mexico Registered Agent (or use a service such as Northwest Registered Agent). This agent will be responsible for receiving legal documents, notice of lawsuits, etc. on behalf of your company
- File the LLC Articles of Organization online, along with the Statement of Acceptance, and a $50 filing fee
- Draft an LLC operating agreement
- Apply for an EIN with the IRS
Form a New Mexico corporation
Follow these steps:
- Decide on your desired corporate tax structure (S corp or C corp)
- Name your new corporation
- Choose a Registered Agent for your business (or use a service)
- Hold an organizational meeting and appoint directors
- File the New Mexico Articles of Incorporation online, along with the filing fee ($100 minimum)
- File the New Mexico Initial Report
- Apply for an EIN from the IRS
Apply for business licenses and permits
Registering your business and forming an LLC or corporation is an important part of starting your business – but in order to operate legally, you will likely also need to obtain certain permits and/or business licenses.
The specifics vary depending on the type of business you are running, as well as your location. For example, restaurants will need health permits, bars will need liquor licenses, and medical service providers will need various professional licenses and federal permits. You will need to research the specifics that relate to your business type.
There are different requirements at each level of government:
- Local: Cities and counties may require certain business licenses or permits. Contact your county clerk for details.
- State: New Mexico may require additional permits and/or licenses in order to operate legally in the state. Check the New Mexico Economic Development website for information.
- Federal: Federal permits/licenses may be required for certain regulated industries, such as construction, medicine and legal services. Check the Small Business Administration (SBA) guide for more details.
At this time, you should also apply for an Employer Identification Number (EIN). An EIN is a federal tax ID that is required to hire employees. You can apply for an EIN online with the IRS – the application is free and quick.
For most businesses, some startup funding will be necessary in order to get started. In step #2, you should have calculated your funding needs while drafting a business plan. Use this information to determine how much funding you need to raise.
For bootstrapped companies, you may be able to get by with your own personal savings, or some seed investments from friends and family. If your funding needs are small, this is likely your best route.
If your business plan indicates that substantial funding is needed, you will likely need to apply for a loan and/or a grant.
- Small business loans are offered by banks, credit unions and other lenders. They can range from as little as a few thousand to hundreds of thousands. Specifics will depend on your business, as well as your personal creditworthiness. Most small business loans are issued in a lump sum, and paid back on a monthly basis, with interest.
- Small business grants are offered by government agencies and some nonprofits. They are essentially business loans that don’t need to be paid back – but they usually have substantial fine print. It’s worth looking into, however, as there may be grants available, particularly for businesses serving an important social need, or for underprivileged entrepreneurs starting their first business.
Set up your business finances
Beyond securing funding, there are other routine tasks that you need to take care of to get your business’ finances in order. This includes:
- Opening a business checking account. You should have a separate business bank account that you use solely for business purposes. You can open this account at most banks, credit unions and financial institutions. Call ahead to see what documents will be required to open this account.
- Open a business credit card or line of credit. This is not strictly necessary, but most businesses can benefit from having a business credit card, and/or a business line of credit. This can be used for day-to-day expenses and purchases, and may also earn you some rewards.
- Set up your accounting system. As a business owner, you will need to keep very detailed records about all revenue and expenses. To do this, you’ll want to set up the proper foundation from day one. This could be investing in an account software such as QuickBooks or Xero, hiring a bookkeeper, or at the very least establishing a spreadsheet to track everything. If you do not have any accounting experience, it’s wise to hire a professional to help.
- Purchase business insurance. Most businesses should have some form of liability insurance, and potentially other forms of business insurance as well. Insurance policies can help protect your equipment and buildings from costly damage, and help shield your company from liability if a worker or customer is injured or otherwise harmed. Speak with a local business insurance provider to get started.
Create a business website
In this day and age, having a solid web presence for your business is very important. And social media profiles, while important, are no replacement for an actual website. You will want to build a professional business website that you can use to drum up business, inform your customers, and stay connected with your clientele.
The simplest way to build a website is to use a website builder from a web hosting provider. When you register a new domain name, look for a provider that also offers web hosting and a site builder, so that you can purchase everything at once and get your site set up quickly.
Unless you plan to operate a solo business (with you as the only worker), you will likely need to hire employees. To do this, you will need a federal employer identification number (EIN), which is a free tax ID number issued by the Internal Revenue Service (IRS).
Businesses must also comply with state-level requirements. This includes reporting new hires to the state within 20 days of their hire date. Employers also need to register for unemployment insurance tax, withholding tax, and gross receipts tax at this time.
There are likely other reporting and tax requirements for employers, as well. Entrepreneurs should consult their accountants for details.
At this point, you also should look into setting up your payroll system – whether you handle it yourself, or use a payroll service.
Run and grow your business
Now it’s time to get down to business and engage with the day-to-day activities that are sure to bring your business success. This means marketing your products and services, maintaining good relationships with your return customers, and setting yourself apart from the competition.
New Mexico business FAQs
Still have questions about running a business in New Mexico? Here are some answers to frequently asked questions.
What are some business resources in New Mexico?
New Mexico entrepreneurs have access to tons of useful resources, organizations, and small business incubators. The New Mexico Small Business Development Center (SBDC) is a great first stop. The SBDC offers free business coaching and several other useful small business resources. The New Mexico District Office of the Small Business Administration (SBA) is another fantastic resource, as is SCORE Albuquerque.
What is the minimum wage in New Mexico?
The New Mexico minimum wage is $10.50 per hour as of 2021. In 2022, this will increase to $11.50 per hour, and again to $12 per hour in 2023. The New Mexico Department of Workforce Solutions has the latest info.
There is one exception to the New Mexico minimum wage law, and it’s for employees who receive tips. Employers can pay as little as $2.55 per hour to employees who receive tips, as long as the total wages (cash wages + tips) equal the full minimum wage.
Keep in mind that it is possible for individual cities or counties to impose their own minimum wage laws that may exceed New Mexico’s minimum wage. Check with local government officials in your area to ensure your business is compliant with all local rules.
What business taxes does New Mexico have?
New Mexico firms will need to pay a variety of business taxes in the state of NM. There is no sales tax (technically), however the gross receipts tax functions similarly to a sales tax, but is paid by the business itself.
Employers in the state will need to pay unemployment insurance tax and withholding tax. Most firms will also be subject to compensating tax and corporate income tax. There may be other requirements; check with the New Mexico Department of Taxation & Revenue for details, or consult your CPA.
How do I dissolve an LLC or Corporation in New Mexico?
To shut down a NM company, you must “dissolve” it. This involves submitting some paperwork to the state, like the Articles of Dissolution for corporations, or the Articles of Dissolution for limited liability companies.
You must also file any outstanding tax returns, pay off your business’ debts, close down your tax accounts, and complete other necessary steps. The process can be complex, so it’s worthwhile to consult your attorney or CPA for help.
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