How to Form a Professional Corporation in New Mexico

Are you considering starting a professional corporation in New Mexico? Congratulations! Establishing a professional corporation is an excellent choice for entrepreneurs and professionals alike who seek to benefit from a business structure that provides limited liability protection, tax advantages, and enhanced credibility. However, navigating the process of forming a professional corporation in New Mexico can be daunting.

This article aims to provide a comprehensive guide on how to form a professional corporation in New Mexico, covering everything from understanding the basics of this business entity to the essential steps and requirements you must comply with to launch your new venture successfully. Let’s dive in and explore the ins and outs of forming a professional corporation in New Mexico!

What is a Professional Corporation in New Mexico?

A professional service corporation (PSC), sometimes called a professional corporation (abbreviated as PC), is a type of organization authorized by state law to allow owners of particularly licensed professions in New Mexico. The owner of a professional corporation is responsible for their own negligence or misconduct, but they are not held personally accountable for the actions of other owners. PC or P.C. is a regularly used abbreviation to identify professional corporations.

PCs and LLCs provide personal asset protection; that is, the personal assets are free from business debts. However, they do not have similar tax benefits. There is no secret formula as to which type of business structure is better than the other. It solely depends on the requirements of your business. However, forming an LLC is easier than setting up a PC in New Mexico.

– LLCBuddy Editorial Team

Unlike other types of corporations, owners of Professional Corporations get two types of citizenship. One is where they incorporated the corporation, and the other is where they conduct the business. This benefit is not available for other types of corporations. You can form a free LLC in New Mexico if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in New Mexico

To form a Professional Corporation for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Registered Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in New Mexico, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

• Doctors
• Architects
• Engineers
• Accountants
• Lawyers and others

You should be qualified to have a license to provide your service. In most cases, once you have graduated with your studies, passed the exam, and got your license, you may now form a professional corporation. However, if you work in an industry that doesn’t offer a license or professional certification, you should consider forming a corporation or limited liability company.

Step 2: Name your Professional Corporation in New Mexico

After you have decided on the idea to form a professional corporation in New Mexico, deciding the name for your corporation is significant. There is a complete guide on New Mexico LLC name guidelines for you to have a proper business name. Here are some regulations you must follow while naming your professional corporation.

• The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
• No confusion with a government entity name.
• A unique name is needed with no match
• Limit of restricted words that need a license.

In New Mexico, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 120 days. To keep the name, you must file a name reservation application with New Mexico Secretary of State.

A professional corporation, professional association, service corporation, or professional service corporation must be present in the name if it doesn’t already. You might opt to register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire to run a clinic or law firm.

Step 3: Choose the New Mexico Registered Agent

The next step in forming a professional corporation is hiring the New Mexico Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in New Mexico. Forming a professional corporation for your service will be easier if you have Registered Agent in New Mexico.

Alternatively, you can serve as your own New Mexico Registered Agent if you have the time. However, you must stay compliant to avoid missing any important documents from New Mexico.

Step 4: File the Articles of Incorporation in New Mexico

After you hire a New Mexico Registered Agent to form a professional corporation, the next step is to file the New Mexico Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Registered Agent contact information should be written. You should also include the names of all co-owners. All owners have to prove they have the proper license to practice the specific profession they intend to.

Filing the Articles of Incorporation in New Mexico may be done with two methods, online and by mail. The Articles of Incorporation fee may vary from different states. However, in New Mexico, it costs Minimum $100 to maximum $1000 for filing online or by mai. It depends on the amount of shares.. Create an account/Log in to the SOS site, get the online form, fill it, and submit online. For offline filing, Send the form by mail to Business Services Division, 325 Don Gaspar, Suite 300 Santa Fe, NM 87501..

Step 5: Write an Operating Agreement in New Mexico

An operating agreement is a document that contains all of your company’s organizational details. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The New Mexico operating agreement includes information like-

1. About Business
2. Members and management
3. Capital contribution
4. Profit Distribution
5. Change of membership
6. Dissolution

Step 6: Designate the PC Board of Directors in New Mexico

The next step is to appoint the initial board of directors in your PC in New Mexico. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the New Mexico SOS. When writing the By-laws, as a shareholder and owner, you must make sure there is a point mentioned about appointing a new director later.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made.

• The responsibilities are given to each officer.
• How will judgments in business be made?
• Where and when are the annual shareholder meetings?
• The minimum number of shareholders required for decision-making.
• Location and timing of dividend payments.

Step 8: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 9: Request an EIN in New Mexico

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in New Mexico can be through the following:

• Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
• Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
• Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
• Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your professional corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 10: Open a Bank Account and Prepare for Taxes

Once you have filed and received your Employer Identification Number, you should open a bank account since you will use this account for yourself, your clients, and your employees.

Your business dealings in New Mexico might be simpler by having a US business bank account because it boosts your company’s legitimacy and liquidity. For firms other than sole proprietorships, most banks demand an EIN to create a business bank account. Also, keeping separate finances helps you avoid combining personal and professional finances. Also, having an EIN makes tax preparation easier. With a professional corporation, you can anticipate paying employment and corporate taxes.

Step 11: Get a Business License in New Mexico

Before your professional corporation operates in New Mexico, you need to have a business license first. A business license is a formal document issued by the state government agency that allows you to operate your business in the geographic region that that agency governs. In New Mexico, business license and permit costs depend on the business’s nature and type. You must check with the local authorities if any special licenses or city-based permits are needed.

Step 12: File Your Taxes in New Mexico

Finally, you are down to the last step. After getting a business license and being ready to operate, do not forget to file your taxes first. You should start paying taxes quarterly as soon as possible to avoid a large tax bill. Each state has different tax requirements. Go through the New Mexico classification of taxes for the taxes an LLC in New Mexico has to pay.

Important Information

Maintaining Professional and Business License in New Mexico

Now that you have established your professional corporation, you must maintain or renew your professional license every now and then. Even if your business is established but you don’t have a valid license to operate, your business is irrelevant. And, even if your professional license is still valid for a year or two, but your business license is already expired, it is still irrelevant.

Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.

Filing an Annual Report in New Mexico

In New Mexico, you will be required to submit a report each year. The owners’ and Registered Agent’s names and contact details are listed in the annual report. Also, it should include all of your yearly financial activity. You must submit one yearly in New Mexico, and you can do it yourself or hire someone else to handle it. Everything must be precise and up to date.

Advantages of Forming a Professional Corporation in New Mexico

A professional corporation takes a lot of time to process and pursue. However, with the help of the New Mexico Registered Agent, everything will become easier. In fact, there are advantages that will help you form a professional corporation in New Mexico.

1. Limited Liability: The biggest advantage of setting up a professional corporation is that the owners are not held personally responsible for the debts and obligations of the company. This indicates that only the company’s assets will be confiscated to settle claims and creditors if the business is sued or declares bankruptcy. Additionally, this protection exempts corporate owners from being held accountable for other owners’ reckless or criminally negligent acts.

2. Tax Deductions: Similar company expenses, such as employee fringe benefits, startup and operating costs, and equipment purchases, can be written off by professional companies in the same ways they can be for other kinds of firms. However, there are several tax deductions professional corporations can take advantage of that other types of businesses can’t. For example, the salaries and bonuses paid to owners and employees are tax-deductible.

3. Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.

FAQs

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Why New Mexico Professional Corporation is So Important

A professional corporation is a legally established entity that allows professionals, such as doctors, lawyers, accountants, or architects, to operate their businesses in a more organized and efficient manner. Unlike traditional corporations, professional corporations are specifically designed to cater to the needs and requirements of licensed professionals.

One of the most important reasons why a professional corporation is so important is that it provides a layer of protection for the professionals involved. By setting up a professional corporation, professionals can protect their personal assets from any liabilities incurred by the business. This means that if the business is sued or faces financial difficulties, the personal assets of the professionals are shielded from potential losses.

Furthermore, a professional corporation also offers tax advantages that can help professionals save money and maximize their profits. By structuring their businesses as professional corporations, professionals can take advantage of various tax deductions and incentives that are not available to sole proprietors or partnerships. This can result in significant savings over time and help professionals grow their businesses more effectively.

Additionally, a professional corporation can help professionals build credibility and trust with their clients. By operating under a professional corporation, professionals demonstrate a commitment to professionalism and integrity, which can help attract new clients and retain existing ones. Clients are more likely to trust and hire professionals who are part of a legally established corporation, as it signals a certain level of expertise and reliability.

Moreover, a professional corporation can also facilitate succession planning and business continuity. By setting up a professional corporation, professionals can ensure that their businesses will continue to operate smoothly in the event of retirement, disability, or death. This can provide peace of mind and security for both the professionals and their families, knowing that their businesses are protected and will continue to thrive in the long run.

In conclusion, the establishment of a professional corporation is a crucial step for professionals looking to set up and grow their businesses in New Mexico. From asset protection and tax advantages to credibility and business continuity, the benefits of a professional corporation are numerous and invaluable. By choosing to operate as a professional corporation, professionals can effectively manage their businesses, mitigate risks, and position themselves for long-term success and growth in their respective industries.

Conclusion

In forming a professional corporation in New Mexico, having someone to help you build it is not necessary but suggestible. Even though it is easy because of the listed benefits and advantages above, forming your group of professional individuals will make it somehow successful. Just make sure to be guided by the steps and ensure that every one of the details and records is accurate and precise. And if you have any questions, share them in the comment section below.