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Setting out on the entrepreneur’s trail and starting a Limited Liability Company (LLC) in New Mexico involves several factors, with cost standing out as a pivotal one. Forming an LLC comes with upfront costs, but diving into business ownership in the Land of Enchantment needn’t empty your wallet.
This article will detail the expenses linked to setting up an LLC in New Mexico and suggest ways to handle your finances smartly. We’ll spotlight services like Tailor Brands, which offer specialized LLC support, ensuring help and a guide to making savvy financial decisions.
Join us as we reveal the actual costs and strategies for effective budgeting while launching your LLC in New Mexico.
What Is the Cost of Forming an LLC in New Mexico?
To get an LLC going in New Mexico, you must mainly shell out a $50 fee. This covers the submission of your LLC’s Articles of Organization via the New Mexico Secretary of State’s online platform.
New Mexico Foreign LLC Formation Costs
If you already own an LLC registered elsewhere and plan to expand your business into New Mexico, you need to register your LLC as a foreign entity in the state. This requires filling out and submitting a Foreign Limited Liability Company Application for Registration, along with a $100 fee for registering the foreign LLC in New Mexico.
Annual Cost for LLCs in New Mexico
Setting up and maintaining a Limited Liability Company (LLC) in New Mexico involves financial details you need to manage wisely. These include expenses such as the annual cost of a registered agent service, which typically runs about $125 if you hire someone, though you can serve as your own agent for free.
Importantly, New Mexico doesn’t require any annual compliance fees, offering a bit of financial relief there.
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How Much Does It Cost to Start an LLC in New Mexico With the Best LLC Service?
Tailor Brands LLC Formation Cost
The base cost to file an LLC in New Mexico is $50, with potential variations for extra services. Normally, the processing time ranges from 2 to 3 weeks. However, for an extra $50, you can speed up the process to 8 to 10 days. There’s also a rush option that shortens the wait to 5 to 6 days for an additional $100.
The Tailor Brands Lite LLC plan offers LLC formation and standard processing times, representing their most affordable option at only the state filing cost. The Essential LLC plan, priced at $199 plus state fees, includes LLC formation service with faster processing, annual compliance, and an operating agreement, with a $199 yearly fee for ongoing services.
The top-tier Elite LLC plan costs $249 plus state filing fees and encompasses all the features of the Essential plan along with additional business tools and services. These extras include a free first-year business domain, a DIY website builder, an online store, eight free logos, a digital business card, tools for creating business cards, and a social media post maker. An annual fee of $249 is required to maintain these services with Tailor Brands.
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Additional Costs When Starting an LLC in New Mexico
New Mexico LLC Name Costs
Choosing a name for your New Mexico LLC is free, costing $0. The New Mexico Secretary of State does not require you to submit a Name Reservation or similar documents. Your LLC name is approved at no extra charge, along with your Articles of Organization.
If you want to reserve your preferred name for 120 days before officially forming your LLC, you need to file an Application for Reservation of a Domestic Limited Liability Company Name with a required $20 filing fee.
New Mexico Registered Agent Costs
When setting up your LLC in New Mexico, one critical requirement is to appoint a registered agent.
This agent, either an individual or a company, handles the receipt of legal documents, known as “Service of Process,” if your LLC is involved in legal proceedings. Choosing yourself or someone you know as the registered agent does not cost extra, ensuring your LLC meets state requirements.
However, hiring a Commercial registered agent typically costs about $125 annually. This option makes sense if:
- You don’t have a physical address in the state, as New Mexico law requires.
- You prefer to keep your personal address off public records. Depending on the service you choose, their address can be used throughout your LLC filings, enhancing your privacy.
No matter which registered agent you select for your New Mexico LLC, there is no fee charged for listing them on your LLC formation documents.
New Mexico Operating Agreement Costs
An Operating Agreement for a New Mexico LLC is a formal document that outlines key aspects of the business, such as ownership details, management structure, and profit distribution methods.
It’s recommended that both single-member and multi-member LLCs create an Operating Agreement. This agreement should be kept with the business’s records, and a copy provided to each member.
While many online services charge between $50 and $200 for drafting LLC Operating Agreements, obtaining one in New Mexico can be done at no cost.
New Mexico EIN Cost
Getting an EIN Number, also known as an Employer Identification Number (EIN) or Federal Tax ID Number (FEIN), is crucial for any LLC in New Mexico. While some websites may offer to help you secure an EIN for a fee, it’s important to remember that obtaining an EIN directly from the IRS costs absolutely nothing ($0).
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New Mexico LLC Taxes
LLC owners in New Mexico must pay several specific types of taxes, including:
Federal Income Taxes
The Internal Revenue Service (IRS) provides various tax treatment options for your Limited Liability Company (LLC). For Single-Member LLCs, the IRS treats them as Disregarded Entities for tax purposes, meaning the LLC itself does not need to file a federal income tax return.
Instead, the owner of the Single-Member LLC must file the return and pay the federal income taxes due. The tax method for the LLC depends on who owns it: If owned by an individual, it is taxed like a Sole Proprietorship.
If a company owns the LLC, it is considered a branch or division of the parent company for taxation.
Multi-Member LLC Taxes
For an LLC that has multiple owners, it is categorized as a Partnership for tax purposes. This requires the filing of a 1065 Partnership Return with the IRS and issuing a Schedule K-1 to each owner. The Schedule K-1 details each owner’s share of the LLC’s profits.
The profits outlined on the K-1 are then “passed through” to the owners, and each owner must report their share of the income on their personal income tax return (Form 1040) and pay the corresponding income taxes.
Husband and Wife LLC Taxes
In states with community property laws like New Mexico, married couples running an LLC have options for their tax classification. They can elect to be treated either as a Single-Member LLC, also known as a Qualified Joint Venture, or as a Multi-Member LLC. This decision impacts how the LLC’s income is reported and taxed.
If they choose the default Multi-Member LLC status, the LLC is treated as a Partnership for tax purposes. Alternatively, if they opt for the Single-Member LLC status, the LLC’s income is reported on the couple’s joint tax return.
Electing Corporate Taxation
Apart from the standard tax classifications, an LLC can choose to be taxed as a Corporation, offering two primary options: S-Corporation or C-Corporation.
For S-Corporation status, the LLC needs to file Form 2553 with the IRS. This election can lead to tax benefits, such as reduced self-employment taxes for businesses with steady profits. It’s typically advisable for businesses that have reached a stable and consistent revenue level.
An LLC can opt for C-Corporation status by filing Form 8832. This choice may be beneficial for accessing perks related to healthcare fringe benefits, which are particularly advantageous for larger employers.
New Mexico State Income Tax
In New Mexico, Single-Member LLCs usually don’t need to file a state-level tax return. Instead, the owner reports the LLC’s profits or losses on their personal state tax return.
Conversely, Multi-Member LLCs in New Mexico are required to file a Partnership return at the state level. Each owner then reports their portion of the LLC’s profits or losses on their individual state tax returns. It’s important to be aware that certain business types in New Mexico may be subject to specific industry-related taxes.
Pass-through Entity Tax
New Mexico offers a Pass-through Entity Tax (PET) option for certain businesses. By choosing PET, an LLC can be taxed at the entity level instead of on the individual returns of its owners. This choice is elective, and businesses wanting to opt for PET must submit Form PTE NM to the New Mexico Taxation & Revenue Department.
Local Income Tax
Local municipalities in New Mexico might levy income taxes on both the LLC and its owners. It’s advisable to consult with an accountant or reach out directly to the relevant municipality to get a clear understanding of the local income tax obligations.
New Mexico Sales Tax
New Mexico differs from most states in that it doesn’t implement a traditional state-wide sales tax. Instead, it uses a Gross Receipts Tax that applies to a variety of business activities.
Should your business activities be subject to the Gross Receipts Tax, your LLC is required to register for this tax by completing the Business Tax Registration Application via the New Mexico Taxation & Revenue Department’s Taxpayer Access Portal. It’s important to note that this tax differs from the typical sales tax.
New Mexico LLC Payroll Taxes
If your New Mexico LLC employs staff, you must handle and submit payroll taxes. These taxes include federal and state income tax withholdings, Social Security tax, Medicare tax, federal and state unemployment taxes, as well as local/county and employee deductions.
Managing payroll and ensuring proper tax withholding and filings can be complex and might cause penalties if inaccurately handled. Although it’s feasible to manage payroll taxes on your own, many choose to hire a payroll service or consult with an accountant for effective navigation of these complexities.
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New Mexico LLC Cost – FAQs
Conclusion
Forming an LLC in New Mexico requires considering more than just the initial registration fee. This process includes securing the necessary documents, hiring registered agents, and managing crucial elements like operating agreements and obtaining an EIN.
Properly handling these financial tasks is essential, which is why expert help from LLC services like Tailor Brands proves invaluable. With a clear understanding of these varied expenses and support from Tailor Brands, aspiring entrepreneurs can confidently start their New Mexico LLC journey feeling well-prepared and secure.
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