New Mexico Startup
Your New Mexico startup business could take many forms: sole proprietorship, partnership,
for-profit corporation, nonprofit corporation, LLC, or even foreign corporation.
Let's look at each of these types of startup businesses.
New Mexico Sole Proprietorship / Partnership
A New Mexico sole proprietorship or partnership is a business that does not provide
limited liability protection; neither of these entity types are considered a separate
entity from its owner(s).
sole proprietorship or
partnership in New Mexico does not typically require a formal filing;
however, both should follow general tax and licensing requirements, which depend
on the type of industry the business is in, and a partnership may submit formal
registration documents to the Secretary of State's office if it chooses.
New Mexico Corporation
A New Mexico
corporation is a type of business that is considered legally separate
from its owners, called shareholders. Shareholders purchase shares of stock in the
company, and corporate profits are distributed to them proportionally.
A corporation may be organized as a nonprofit or for-profit corporation. For-profit
corporations will choose one of two tax classifications at the federal level: C
corporation, or S corporation. Both entity types are formed with the New Mexico
Corporations Bureau of the Public Regulation Commission.
C corporation has a higher degree of federal taxes, but it allows for any
number of shareholders. It also allows for shareholders themselves to be business
entities, and a C corporation can hold stock in other corporations.
S corporation is considered a pass-through entity; rather than profits being
taxed at the corporate level, and then again when passed to shareholders as profit,
the corporate tax is waived, and only when the income reaches its shareholders is
it reported on these individuals' personal income.
A nonprofit corporation in New Mexico is one that is formed for a purpose other
than to financially benefit the owners; there are no shareholders. Rather, a nonprofit
corporation is formed for public or mutual benefit. Some corporations formed for
specific purposes, such as religious or educational, can apply to the IRS to be
treated as a 501c3
New Mexico LLC
A limited liability company, or
LLC is a relatively new entity type, and it is not recognized by the IRS
as a tax classification. Depending on the amount of owners, it will elect a tax
classification with the IRS.
An LLC, like a corporation, provides limited liability to its owners. Unlike with
a sole proprietorship, a New Mexico LLC is considered a separate legal entity, and
the corporate veil protects the owner's personal funds from being seized to pay
for debts and obligations of the business.
New Mexico Foreign Corporation
A business organized in another state (called its domestic state) cannot simply
begin doing business in New Mexico; it must first apply for qualification to do
business as a