How to Start an S-Corp in New Mexico

New Mexico, popularly known as The Land of Enchantment, offers a bunch of benefits for business owners, especially the state capital Santa Fe has a lot to offer to the rising entrepreneurs in the state. If you want to start a business in New Mexico, you must choose an appropriate corporate structure. You can have a corporation or a sole proprietorship or set up an LLC in New Mexico. There are a few guidelines that you should be aware of when it comes to starting an S-Corporation. In New Mexico, S-Corporation is businesses’ most common corporate structure, especially start-ups. It was developed in order to give companies limited liability protection while preserving the advantages of being a distinct legal organization.

In this article, you will learn about how to start an s-corporation in New Mexico. You will also learn whether an s-corporate business structure suits your business. Please read all the points carefully before starting your business in New Mexico.

What is an S-Corp in New Mexico?

An S corporation (S-corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other business structures. It’s a tax classification that might result in significant financial savings for both corporations and LLCs but in different ways. S-corp is similar to LLC, except that the IRS treats it as a corporation for tax purposes.

If you want an S corp status for your business, you can always form an LLC to protect your personal assets from business debts. It takes some basic steps to have a successful s-corporation in New Mexico. S-Corps do pay corporate income taxes, but they are still treated as disregarded companies for federal tax purposes.

S-corps pay corporate taxes that LLCs do not have to pay. If you want to have an S-corp status, then we would recommend you have an LLC instead. This will protect your personal assets from your business liabilities and you don’t have to pay any corporate taxes.
–LLCBuddy Editorial Team

Limitation and Requirements of S-Corp in New Mexico

As you have decided to have an S-Corp structure for your business, you must know the limitations and requirements to qualify for S-Corp status. We have listed some important points to consider following for your reference-

Be a domestic corporation.
Not be an ineligible corporation, such as specific financial institutions, insurance providers, or domestic corporations engaged in overseas sales.
Have just one type of stock.
Have a maximum of 100 shareholders or members.
Have only permitted individuals, certain trusts, and estates as stockholders or members.

If you are qualified for the limitations and requirements, you can apply for an S-Corp in New Mexico.

How to Start an S-Corporation in New Mexico?

To create S-Corp in New Mexico, you must follow the below guidelines that include forming a business name, hiring a Registered Agent, filing your Articles of Organization, creating an operating agreement in New Mexico, requesting an EIN, filing a form 2553.

Step 1: Register a Business Name in New Mexico

After you have decided on the idea to start an S-Corp in New Mexico, deciding the name for your corporation is significant. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity.

If you want to set up an LLC, there is a complete guide on New Mexico LLC name guidelines for a proper LLC name. Here are some guidelines you must follow while naming your S-corp.

Avoid profanities
The name should be available, and no other entity should have the same name in New Mexico.
Limit of restricted words that need a license in New Mexico, for example, doctors, attorneys, etc.
Do not use a business name that sounds like a government agency or entity (like “police,” “county,” and “state”)

Step 2: Hiring the New Mexico Registered Agent

The next step in starting an S-corp in New Mexico is hiring a 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 (such as subpoenas), all notices of lawsuits, and other official government correspondence in New Mexico. Forming an LLC and an S-corp will be easier if you have Registered Agent in New Mexico.

Step 3: File Your New Mexico Articles of Organization

The Articles of Organization is an important document to start your limited liability company (LLC). New Mexico Articles of Organization is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization. In order for the “Articles of Organization” to be filed, you need to pay a filing fee to the state. In New Mexico, the filing fee is $50.

In California, along with the Articles of Organization, you must send the Statement of Information to file your company. The statement of information is a mandatory document in California, but other states do not have this document.

Step 4: Creating an Operating Agreement in New Mexico

After you have filed your Articles of Organization in New Mexico, the next step is to create an LLC operating agreement in New Mexico. The New Mexico LLC operating agreement is essential and necessary since it will cover your corporation’s important documentation and rules. The operating agreements usually include the following-

Article I: Organization
Article II: Management and Voting
Article III: Capital Contributions
Article IV: Distributions
Article V: Membership Changes
Article VI: Dissolution

After creating the LLC operating agreement, you can benefit in several ways since it will discuss how decisions for the business will be made, including management and member voting structure. For more details about how an operating agreement works, please check Operating Agreement.

Step 5: Request for 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 general partnership. 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- You can apply for EIN online, the most desirable and fastest method for users.
Apply by Fax- Another method of obtaining EIN is to fax Form SS-4 (PDF) after entering all the correct information to (855) 641-6935.
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.

If you would like to be assisted in getting an EIN in the Internal Revenue Service, we can get your EIN for you. Our EIN service is quick and hassle-free. For more details about EIN for your business, check why you need EIN.

Step 6: File Form 2553 for Your S-Corp Business in New Mexico

Once you have obtained your EIN and Articles of Organization to form an S-Corp, you must file Form 2553, Election by a Small Business Corporation, to apply for S-corp status. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or not more than 75 days after the beginning of the tax year in which the election is to take effect.

If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, in order to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS. In New Mexico, you can send your form 2553 to the Department of the Treasury Internal Revenue Service Center – Ogden, UT 84201 Fax: 855-214-7520 .

Advantages of Starting an S-Corporation in New Mexico

Filing an S-Corp in New Mexico has numerous benefits and advantages.

Writing Off Losses: With S-corp, owners can deduct business losses from their individual income statements. If the company loses money in the first few years, it may balance its other sources of revenue. Even so, understand the shareholder loss limitations set by the IRS.

Pass-Through Taxation: Starting an S-Corp is the widely known advantage in forming this kind of business structure since an s-corp uses a pass-through taxation structure. The company does not pay twice the tax in this kind of taxation. Because of this structure, most start-ups and entrepreneurs in New Mexico apply for an S-Corp LLC.

Qualified Business Income Deduction: A qualified business income, or QBI, is the total of all qualified items of income, gain, deduction, and loss from any qualified trade or business, including S-Corp. With this, S corp owners may deduct up to 20% of their eligible earnings under the Tax Cuts and Jobs Act.

FAQs

What is an S-Corp?

An S-Corp is a type of corporation that is recognized by the IRS and offers certain tax benefits. It is a separate legal entity from its owners and provides limited liability protection.

How do I form an S-Corp in New Mexico?

To form an S-Corp in New Mexico, you must file Articles of Incorporation with the New Mexico Public Regulation Commission. You will also need to create bylaws and appoint officers.

What information do I need to form an S-Corp in New Mexico?

When forming an S-Corp in New Mexico, you will need to provide the name and address of the business, the purpose of the corporation, the number of authorized shares, and the names and addresses of the directors.

What are the filing fees for forming an S-Corp in New Mexico?

The filing fee for forming an S-Corp in New Mexico is $50.

Is there a minimum number of shareholders required to form an S-Corp in New Mexico?

Yes, in New Mexico the minimum number of shareholders to form an S-Corp is one.

What documents do I need to file to maintain an S-Corp in New Mexico?

To maintain an S-Corp in New Mexico, you must file an annual report and pay the annual franchise tax. You must also keep minutes of the meetings of the shareholders and Board of Directors, as well as other corporate records.

Is there a minimum paid-in capital requirement for an S-Corp in New Mexico?

No, there is no minimum paid-in capital requirement for an S-Corp in New Mexico.

Do I need to register my S-Corp in New Mexico with the Secretary of State?

Yes, you must register your S-Corp in New Mexico with the Secretary of State in order to do business in the state.

What are the corporate income tax rates for an S-Corp in New Mexico?

The corporate income tax rate for an S-Corp in New Mexico is 5.125%.

Do I need to obtain a business license to operate an S-Corp in New Mexico?

Yes, you must obtain a business license in order to operate an S-Corp in New Mexico.

Is there a minimum amount of time that I need to operate an S-Corp in New Mexico?

No, there is no minimum amount of time that you need to operate an S-Corp in New Mexico.

Are there any restrictions on the types of business activities that I can conduct with an S-Corp in New Mexico?

Yes, there are certain restrictions on the types of business activities that you can conduct with an S-Corp in New Mexico.

Is there a required annual meeting for S-Corps in New Mexico?

Yes, you must hold an annual meeting for S-Corps in New Mexico to elect directors, review financial statements, and approve new business activities.

Can I form an S-Corp with just one shareholder in New Mexico?

Yes, you can form an S-Corp with just one shareholder in New Mexico.

What are the requirements for foreign entities to form an S-Corp in New Mexico?

Foreign entities must obtain a Certificate of Authority from the New Mexico Public Regulation Commission in order to form an S-Corp in the state.

What are the filing deadlines for S-Corps in New Mexico?

The filing deadline for S-Corps in New Mexico is March 15th of each year.

Is there a state tax on S-Corp income in New Mexico?

Yes, there is a state tax on S-Corp income in New Mexico.

Do I need to pay estimated taxes for an S-Corp in New Mexico?

Yes, you are required to pay estimated taxes for an S-Corp in New Mexico.

Does New Mexico have a tax on corporate dividends?

Yes, New Mexico does have a tax on corporate dividends.

What is the tax rate for dividends from an S-Corp in New Mexico?

The tax rate for dividends from an S-Corp in New Mexico is 6.2%.

Is there an annual franchise tax for S-Corps in New Mexico?

Yes, there is an annual franchise tax for S-Corps in New Mexico.

What is the filing deadline for the annual franchise tax in New Mexico?

The filing deadline for the annual franchise tax in New Mexico is April 15th of each year.

Does New Mexico have a personal income tax?

Yes, New Mexico does have a personal income tax.

Is there a business tax for an S-Corp in New Mexico?

Yes, there is a business tax for an S-Corp in New Mexico.

What are the annual reporting requirements for S-Corps in New Mexico?

All S-Corps in New Mexico must file an annual report with the Public Regulation Commission.

What are the employee withholding requirements for an S-Corp in New Mexico?

All S-Corps in New Mexico must withhold state income tax from the wages of their employees.

Is there a New Mexico sales tax?

Yes, there is a New Mexico sales tax.

What are the compliance requirements for an S-Corp in New Mexico?

All S-Corps in New Mexico must comply with the state’s corporate laws, including the filing of annual reports, payment of taxes, and other requirements.

What are the requirements to start an S-Corp in New Mexico?

To start an S-Corp in New Mexico, you will need to file a Certificate of Formation with the Secretary of State, appoint a registered agent, and hold an organizational meeting.

What is the cost to start an S-Corp in New Mexico?

The cost to start an S-Corp in New Mexico is $50, which is the filing fee for a Certificate of Formation.

What is the process to start an S-Corp in New Mexico?

The process to start an S-Corp in New Mexico includes filing a Certificate of Formation with the Secretary of State, appointing a registered agent, and holding an organizational meeting.

Are there any additional filing requirements for an S-Corp in New Mexico?

Yes, after you’ve filed your Certificate of Formation and held your organizational meeting, you’ll need to submit a New Mexico Corporate Franchise Tax return and obtain a Certificate of Good Standing from the Secretary of State.

What are the benefits of starting an S-Corp in New Mexico?

Starting an S-Corp in New Mexico provides limited liability protection for the owners, tax savings for the owners, and access to business financing.

Why New Mexico S Corporation is So Important

One of the key advantages of the S Corporation is its pass-through taxation. Unlike traditional corporations, S Corporations are not subject to double taxation. This means that the profits of the business are only taxed at the individual level, rather than at both the corporate and personal levels. This can lead to significant tax savings for owners and shareholders, making it a highly efficient option for many businesses.

In addition to the tax benefits, S Corporations also offer limited liability protection to their owners. This means that owners are not personally liable for the debts and liabilities of the business, protecting their personal assets from creditors. This can provide peace of mind to entrepreneurs and investors, allowing them to focus on growing their business without worrying about their personal financial security.

Furthermore, the structure of an S Corporation allows for flexibility in ownership. Unlike traditional corporations, which have restrictions on the number and type of shareholders, S Corporations can have up to 100 shareholders who can be individuals, trusts, or certain types of entities. This makes it easier for businesses to raise capital and attract investors, leading to more opportunities for growth and expansion.

Another important aspect of S Corporations is their ability to transfer ownership. In many cases, the shares of an S Corporation can be easily transferred or sold, providing owners with an exit strategy and allowing for smooth transitions in ownership. This can be particularly beneficial for businesses looking to bring in new partners or investors, or for owners who are looking to retire or move on to other ventures.

Overall, the New Mexico S Corporation offers a unique combination of tax advantages, limited liability protection, flexibility, and ease of transferability. These benefits make it an ideal choice for many small and medium-sized businesses looking to maximize their financial efficiency and protect their personal assets. By taking advantage of the opportunities offered by the S Corporation, entrepreneurs in New Mexico can set their businesses up for long-term success and growth.

Conclusion

In conclusion, starting an S-corp in New Mexico is a strategic choice for entrepreneurs seeking the benefits of limited liability and favorable tax treatment. One can successfully establish an S-corp by following the outlined steps, including selecting a unique name, filing the Articles of Incorporation, obtaining necessary licenses, and adhering to state-specific regulations. Ultimately, this corporate structure offers a strong foundation for business growth and protection, making it a worthwhile consideration for those looking to launch a venture in New Mexico.