To officially launch a business in New Mexico, there are several steps to research and complete. These include choosing your business type, filing the correct paperwork, and registering with the appropriate state agencies.
If you’re new to entrepreneurship and feel unsure about the registration process, you’re in the right place. This guide breaks down the steps required to establish your business legally in the state. We’ll explain everything from selecting a business structure to filing the necessary paperwork using easy-to-understand language.
Related: Starting A Business In New Mexico Checklist
Step 1: Choose a Business Structure
The first step in registering a new business in New Mexico is selecting a business structure (also called a business entity). A business structure is how a business is legally set up to operate. This choice determines the legal and financial responsibilities of the business owner(s) and the extent of personal liability for business debts and obligations, so it’s important to research the options.
In New Mexico, the four most common business structures are the sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).
Related: Comparison of Business Structures
Sole proprietorship: This is the simplest business structure, where the owner is solely responsible for all aspects of the business. Pros include ease of formation as there is no formal paperwork or registration with the state, and the owner has complete control over the business operations. However, the owner also bears unlimited personal liability for the business’s debts and obligations, putting personal assets at risk.
Related: How to Start a Sole Proprietorship in New Mexico
General partnership: This business entity involves two or more individuals who agree to share in the profits and losses of a business. Similar to a sole proprietorship, the formation process is relatively simple. Pros include shared decision-making and pooled resources. However, each partner has unlimited personal liability for the business’s debts and obligations, potentially exposing personal assets to risk.
Corporation: A corporation is a separate legal entity from its owners, providing limited liability protection. Pros include limited liability, easy transfer of ownership, and potential tax advantages. However, corporations face more complex regulations and reporting requirements and the possibility of double taxation.
Related: How to Form a New Mexico Corporation
Limited Liability Company (LLC): An LLC combines the benefits of a corporation’s limited liability with the flexibility and simplicity of a sole proprietorship or partnership. Pros include limited liability for owners, flexible management structure, and potential tax benefits. However, New Mexico LLCs have more complex formation and annual report requirements than sole proprietorships and general partnerships, though they are fewer than corporations.
Related: How to Form a New Mexico LLC
Step 2: Select a Business Name
After choosing your business structure, the next step is often to select a business name. In New Mexico, the process is somewhat different from that of many other states, particularly for sole proprietors and general partnerships.
As a sole proprietor or general partnership in New Mexico, you can operate your business under the owner(s) full legal name or choose a specific business name without any formal registration process. Interestingly, New Mexico does not have registration requirements for businesses using a DBA (Doing Business As) or trade name, nor does it provide a method to register or file a DBA with the state.
Corporations and Limited Liability Companies (LLCs) select their business names during the formation process. These names must be unique within New Mexico, so conducting a New Mexico business name search is necessary before filing formation documents to ensure your chosen name is available.
If you have specific aspects of your business you want to protect, such as a unique trademark or other intellectual property, consider registering your trademark with the New Mexico Secretary of State or the U.S. Patent and Trademark Office.
Step 3: Federal Employer Identification Number
A common registration for many businesses is the Federal Employer Identification Number (FEIN), also known as a Federal Tax Identification Number. This is a unique nine-digit code the Internal Revenue Service (IRS) assigns to identify businesses.
You need an EIN if:
- Your business has employees
- Your business is structured as a corporation, partnership, or multi-member LLC
Sole proprietorships or single-member LLCs without employees can use the owner’s Social Security Number for tax purposes. However, these business owners may still opt for an EIN to avoid using their personal SSN on business documents.
Obtaining an EIN is a straightforward, cost-free process. The most efficient method is to apply online through the IRS website, which typically takes just a few minutes. Alternatively, you can submit your application by mail or fax using Form SS-4.
Step 4: Professional Licensing
Certain occupations in New Mexico require specific professional licenses to operate legally. These licenses are typically issued by state boards or agencies that regulate particular professions.
Who needs to register: Professionals such as lawyers, accountants, engineers, architects, cosmetologists, real estate agents, and contractors often need to obtain licenses before practicing in New Mexico.
Where to register:
- The New Mexico Regulation and Licensing Department handles licensing for numerous professions, including contractors, real estate agents, and various medical practitioners.
- Some professions have dedicated boards within or associated with the department:
- New Mexico State Bar Association for attorneys
- New Mexico Board of Accountancy for Certified Public Accountants
- New Mexico Board of Pharmacy for Pharmacists
Each profession has its own set of requirements, application processes, fees, and renewal procedures. Professionals should contact the appropriate board or division within the New Mexico Regulation and Licensing Department for detailed information about obtaining and maintaining their licenses.
Step 5: Combined Reporting System (CRS) Number
All businesses operating in New Mexico must register with the New Mexico Taxation and Revenue Department to obtain a Combined Reporting System (CRS) number. This 10-digit tax identification number, also known as a State Tax ID number, is a requirement for all businesses in the state.
To obtain your CRS number:
- Register through the Taxpayer Access Point on the New Mexico Taxation and Revenue Department website.
- After registration, you’ll receive your 10-digit CRS number.
- The process typically takes about two business days to complete.
The CRS number serves multiple purposes:
- It’s used to report and pay the New Mexico Gross Receipts Tax.
- Businesses with employees in New Mexico are required to report and pay withholding taxes.
It’s important to note that New Mexico’s Gross Receipts Tax differs from a standard Sales Tax. This tax applies to all products sold and services rendered in the state, making it broader in scope than a typical Sales Tax.
Step 6: Non-Taxable Transaction Certificate
In New Mexico, businesses that purchase merchandise to resell can benefit from obtaining a Non-Taxable Transaction Certificate (NTTC). The NTTC allows these businesses to purchase inventory without paying gross receipts tax at the time of purchase. Instead, the business will collect the appropriate tax from the end customer when the item is sold.
This certificate is particularly useful for:
- Retailers
- Wholesalers
- Manufacturers
- Service providers who incorporate goods into their services
To obtain an NTTC, register for a Combined Reporting System (CRS) number with the New Mexico Taxation and Revenue Department.
Step 7: Local Business Licenses
While there isn’t a general state business license in New Mexico, many cities and counties require local business licenses for specific types of businesses. Here are some common types:
- Food Service Licenses: Restaurants, food trucks, and catering businesses often need licenses from local health departments. For example, the City of Albuquerque requires food service establishments to obtain a permit from the Environmental Health Department.
- Liquor Licenses: Businesses selling alcohol typically need licenses from both state and local authorities. The New Mexico Regulation and Licensing Department’s Alcoholic Beverage Control Division handles state-level licensing, while local governments may have additional requirements. As an example, the City of Santa Fe requires businesses to obtain a local liquor license through its City Clerk’s office.
- Contractor Licenses: Many cities require contractors to obtain local licenses in addition to state-level certifications. For instance, the City of Las Cruces mandates contractors register with its Community Development Department.
- Childcare Licenses: Daycare centers and in-home childcare providers often need local licenses to operate. The City of Roswell, for instance, requires childcare facilities to obtain a permit from its Code Enforcement Division.
It’s important to note that licensing requirements can vary significantly between different cities and counties in New Mexico. Always check with your local government offices to determine the specific licenses required for your business in your area.
Step 8: Local Building & Zoning Permits
When setting up a business location in New Mexico, it’s important to understand and comply with local building and zoning requirements before finalizing any property purchase or lease.
Local governments typically manage the following types of permits and requirements:
Zoning Permits: Zoning laws dictate which areas are designated for commercial, residential, or mixed-use, and there are restrictions on where a business can be located. Check with your local planning or zoning department to confirm that your intended business activities align with the zoning designation of your chosen location.
Building Permits: If you plan to construct a new building or make significant modifications to an existing structure, you’ll likely need a building permit. These permits ensure that construction meets local building codes and safety standards. Many municipalities also require a certificate of occupancy before allowing a business to operate from a building.
Sign Permits: Many localities have specific regulations about business signage, including size, placement, and illumination. You may need to obtain a sign permit before installing any exterior signs for your business.
Home Occupation Permits: Some municipalities require a special permit if you plan to run a business from your home. These permits often restrict customer traffic, parking, and the types of activities allowed. For example, the City of Rio Rancho requires home-based businesses to obtain a Home Occupation Permit from its Development Services Department.
Each city or county in New Mexico may have its own specific requirements and processes for these permits, and it’s advisable to contact your local planning, zoning, or community development department early in your business planning process.
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