Starting a Business in New Mexico
2009 Business Resource Guide
General Tax and Licensing Requirements
In New Mexico most businesses must register with the New Mexico Taxation and
Revenue Department, and may be required to report and pay gross receipts tax and state income
tax withholding on employee wages, as well as income tax on taxable income of the business. If
the business has employees, it will be required to register with the New Mexico Department of
Labor, and will probably be required to pay State Unemployment Taxes. In addition, if the
business is required to provide Workers Compensation coverage, the business will be required to
file quarterly reports with the New Mexico Taxation and Revenue Department.
Most businesses will also be required to obtain an occupation license from the
municipality or county where its office(s) is located. Property used in the business must be
assessed for property taxes by the County Assessor's office in the county where the property is
Choice of Entity
If you are considering starting a business in New Mexico, you will need to decide how
you want to organize your business. The decision involves many different factors, including
questions of legal liability, tax considerations, and operational factors. It is a good idea to
consult with professionals in making this decision.
Many of the registration and licensing requirements imposed by State and local
governments are determined by the type of entity that you select. The following is a brief
summary of some of those requirements and the agencies that you should contact.
NOTE: The Public Regulation Commission does not recommend one form of
legal entity over another and urges that you seek the advice of counsel and other
appropriate professionals before deciding whether to organize and, if so, what
form of legal entity is best for you.
A sole proprietorship is not a separate entity. The owner of the business and the business itself are one and the same, and there is no need to file a document to create a sole proprietorship. The General Tax and Licensing Requirements discussed above
will usually be applicable to a sole proprietorship.
A partnership is an association of two or more persons who carry on a business for profit as co-owners. There are various types of partnerships. As with a sole proprietorship, the General Tax and Licensing Requirements may be applicable.
Although it s a good idea to have a written agreement, a general partnership can be formed orally or in writing. There is no requirement that a general partnership file an agreement or certificate before it can exist. However, the partnership may file a certificate of registration with the New Mexico Secretary of State, under the New Mexico Uniform Partnership Act.
A limited partnership provides some protection from
liabilities of the partnership for limited partners. The partnership must have at least one general
partner who is not protected from the liabilities of the partnership, and at least one limited partner. A limited partnership is formed by filing a Certificate of Limited Partnership with the New Mexico Secretary of State, in compliance with the Uniform Limited Partnership Act.
Limited Liability Partnerships. Partnerships (general or limited), who comply
with certain insurance requirements, and file a registration statement with the New Mexico
Secretary of State, may obtain some protection from liabilities.
Corporations are legal entities separate from the owners. Corporations provide the owners (referred to as shareholders) with some protection from liabilities incurred by the business. A corporation is created (formed), by filing articles of incorporation. New Mexico
corporations are formed by filing articles of incorporation with the New Mexico Public
Regulation Commission-Corporations Bureau. Certain special purpose organizations may be
required to comply with other laws before they may file articles of incorporation. For example,
organizers of banks formed under State law are required to obtain permission from the Director
of the Financial Institutions Division of the Regulation and Licensing Department, prior to
filing articles of incorporation with the Public Regulation Commission. Similar requirements
apply to trust companies and other special purpose corporations.
Many people mistakenly believe that S-corporations under Federal tax law are formed differently from other corporations under State law. A corporation's status as an S-corporation is governed by the Internal Revenue Code, not by State law.
Professionals such as lawyers, doctors, accountants,
engineers, and other licensed professions may incorporate under the New Mexico Professional
Corporations Act. Unlike business corporations, a professional corporation may only be
incorporated by a person licensed to conduct the profession for which the corporation is
organized. The corporation is organized by filing articles of incorporation with the New Mexico
Public Regulation Commission-Corporations Bureau.
Limited Liability Companies
Limited liability companies (LLC's), are a relatively
new type of entity. They are sometimes mistakenly referred to as limited liability corporations.
The New Mexico Limited Liability Company Act was adopted in 1993. LLC's provide the
owners with protection from liabilities that is similar to corporations. LLC's are formed by filing articles of organization with the New Mexico Public Regulation Commission-
Corporations Bureau. The owners have some flexibility in deciding how an LLC will be taxed, and professional assistance is generally advisable.
To qualify as a non profit corporation, no part of the income
or profit may be distributable to its members, directors or officers. The corporation is formed by
filing articles of incorporation with the New Mexico Public Regulation Commission-
Corporations Bureau. In addition, charitable corporations that solicit funds may be required to
register and file reports with the New Mexico Attorney General's Office under the Charitable
Businesses Organized in Other States
Businesses that have been organized in other states may be required to register and
qualify to do business in New Mexico. Foreign corporations and limited liability companies
should contact the New Mexico Public Regulation Commission-Corporations Bureau. Foreign partnerships should contact the New Mexico Secretary of State.
Tradename (D.B.A.) and Trademark Issues
The State of New Mexico does not require that a business register its use of a tradename
(sometimes referred to as a fictitious name, doing business as or d.b.a.). The use of a tradename
that is different from the legal name of the business can have legal implications that should be
discussed with your attorney.
If the business has a unique tradename or mark that distinguishes it from other
businesses, the business may want to register the mark with the New Mexico Secretary of State.
New Mexico's trademark and service mark registration law is designed to mirror federal
It should be noted that the Secretary of State and the New Mexico Public Regulation
Commission-Corporations Bureau, each maintain separate databases, and registration with one
of these State offices may not prevent someone else from registering the same name with the
other State office.
Other Applicable Laws
Depending upon the nature of the business, and its intended activities, other State or local
laws could affect your business. For example, if your business intends to raise capital by issuing
securities, you may be required to comply with the New Mexico Securities Act, which is
administered by the Securities Division of the New Mexico Regulation and Licensing
Department. The definition of "securities" is broad and includes stock, limited liability
company membership interests, limited partnership interests, notes, and investment contracts.
Solicitation of capital in violation of the Securities Act, could subject a promoter to civil and
criminal liability under State and Federal law. If your business will have more than a few
owners, or owners who are not going to be directly involved in the operation of the business, you
should determine whether you are required to register or file a claim of exemption with the
Securities Division of the New Mexico Regulation and Licensing Department.
Insurance companies, credit unions, escrow companies, trust companies and other types
of businesses may also be required to comply with registration requirements and other applicable
Most professions, and many other business activities, such as construction activities and
businesses that serve alcohol, are also regulated by State law, and require compliance with
licensing requirements. Most of the occupation licensing laws are regulated by the New Mexico
Regulation and Licensing Department.
Local governments may also have special permit requirements for certain businesses.
Businesses that serve food or drink may be required to obtain permits by the municipal or county
government where the business is located.
Most State agencies are happy to answer general questions and provide forms that may
assist you in the operation of your business. However, if you have legal questions, State
employees are not permitted to provide legal advice. You should consult a lawyer if you have
legal questions. Other professionals, including accountants and financial planners may be able
to provide assistance as you decide how to organize and operate your business.
Prepared by Robert D. Gorman, Esq., C.P.A.