8 Steps to Forming a New Mexico LLC

So you've done all your research, you've spoken with your attorney, and you know that an LLC is the right entity for your new business.  You've decided you want to form the LLC on your own to save legal fees and get the ball rolling.  All you have to do is submit a form to the New Mexico Public Regulation Commission, right?  Wrong.  There are a number of crucial steps to forming your LLC that when done correctly can save you a great deal of headache, hassle, and possible litigation down the road.  It is always crucial to speak with an experienced business attorney when determining which entity is right for you.  There are liability and tax implications that go beyond a basic understanding of business formations.   For those of you who want to take the next step on your own, the eight most important steps to forming an LLC are listed below.

1. Search the Public Regulation Commission website to ensure that the business name you want is available.  It is important to know that the name you want is available before you start spending money developing a logo, spending money on stationary, or even worse throwing money away on advertising a trade name that may already exist and land you in court.

2. Perform a state and federal trademark search to ensure there is no possible infringement.

3. File Articles of Organization with the PRC.  The form can be found here.  It is important to understand the difference between a member managed and a manager managed LLC, and the implications of your choice.  For example, if you ever plan to raise capital by selling membership shares of your LLC, it is important to select the "manager managed" option. 

4. Obtain a Federal Employment Identification Number (FEIN).  This can be done online at the IRS website.

5. Obtain a New Mexico tax ID number (CRS Number).  The form can be found at the State Tax and Revenue Website.  Yes, you will have to pay gross receipts taxes.  It is better to accept this fact now and start paying than to get hit with fines and penalties years down the road when you least expect it.  The recent debacle with local restaurant chain Garduno's should be all the evidence you need of what can happen if you fail to pay.

6. Obtain a business license.  The requirements here will differ depending on the location of your business.  You can obtain your Albuquerque business license from the city's website.  Commercial businesses (those operating from an office or commercial location) need to fill out this form.   Home based businesses must complete this form.

7. File status report documents with the New Mexico Department of Workforce Solutions.  The form can be found here, or you can file online here.  You have to file this status report whether or not you have any employees or plan to hire any in the near future.

8. Draft and execute an operating agreement.  This is the most crucial step for any LLC with more than one member.  Without a carefully drafted operating agreement, there is no agreed upon method for settling disputes among members, no agreement as to how profits and losses will be shared, and no mechanism to ensure the LLC will continue should one or all of the members die.  A discussion of buy-sell agreements funded by life insurance will come in a future blog post.  You absolutely cannot move forward as a multi-member LLC without a solid operating agreement.  Don't make the mistake of simply copying a form you find online.  It is important to think about your particular business and its members and create a document that will protect everyone involved and the business itself. 

Still Have Questions?

The most important decision for your new business is determining which entity is right for you.  LLC's are not right for every type of business, and it's important to do your research and speak with professionals if you still have questions.  Implications of legal liability and tax treatment are important decisions for any new business.  If you have any questions or comments regarding this topic, contact us at (505) 243-9213 or info@mathisregazzi.com.