Transferring ownership of an LLC is one of the most important things you need to do. If you want to sell your business or buy another business, it’s essential to know how to convert a sole proprietorship into an LLC. This video explains what you need to do to form an LLC in NM.
What is an LLC? A corporation is a legal entity under state law to facilitate the separation of individual ownerships from the organization itself. In contrast, the assets of an LLC typically cannot be used to satisfy debts incurred by its members—those who comprise the LLC—for personal liabilities.
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There are several advantages to having an LLC in New Mexico.
An LLC offers several advantages over a corporation. First, unlike corporations, LLCs do not have shareholders. Second, LLCs do not issue stock; rather, they issue membership interests. Third, LLCs are less complex and expensive to maintain than corporations. Fourth, LLCs are not required to disclose financial statements to anyone. Fifth, LLCs do not need to follow the corporate formalities outlined above. Finally, LLCs are exempt from certain taxes.
Disadvantages and Limitations of an LLC in New Mexico
An LLC is different from a Corporation in many ways. Corporations require shareholders, while LLCs do not. An LLC protects the owner(s), rather than the business itself. This makes sense because the owner is responsible for the debts and liabilities of the business.
There are two types of LLC: General and Limited. A General LLC requires a filing fee with the Secretary of State’s office. If the LLC has multiple members, each member must file a separate document with the Secretary of State. In contrast, a Limited LLC does not require a filing fee with the Secretaries of State Office. Instead, the LLC files a single document with the Secretary of States Office.
The LLC does not require an operating agreement. However, some states like New Mexico require that the owner sign an operating agreement.
In addition, an LLC needs an Employer Identification Number (EIN). If the LLC has more than one member, each member must apply for his/her own EIN.
If the LLC has been formed prior to January 1st, 2018, the LLC cannot use the name “Limited Liability Company.” Instead, the LLC must use the name “Professional Service Organization.”
Steps to convert your business to an LLC in New Mexico
An LLC is a type of legal entity used to limit liability for individuals involved with the business. If you are considering converting your existing business into an LLC, here are some steps to take.
1. Determine what type of business you want to form. You can choose one of four types of entities: sole proprietorship, general partnership, limited partnership, and corporation. Each has different requirements for filing Articles of Organization with the state.
2. Obtain an Employer Identification Number (EIN). This is required if you plan to hire anyone. In addition, you must file federal tax returns as an LLC.
3. Form an LLC. Once you obtain an EIN, you can apply for an LLC registration certificate online. The process takes less than 10 minutes. After registering, you can submit Articles of Organization to the secretary of state.
4. File annual reports. Every three months, you must file an Annual Report with the secretary of state. These filings are due within 30 days after the end of each quarter.
5. Pay taxes. As an LLC, you are responsible for paying quarterly franchise taxes.
6. Register property. When you purchase real estate, you must register ownership with the county clerk where the land is located.
Maintaining Your LLCs
The limited liability protection offered by an LLC is one of the most important things you can do to protect yourself and your family from lawsuits. But what happens if you don’t maintain it properly? If you fail to keep up with the paperwork required to register your LLC, you could find yourself facing serious consequences.
LLCs are treated like partnerships under state law, meaning there is no legal distinction between members of the LLC and partners in a partnership. As such, anyone involved in the operation of the LLC must file certain documents with the Secretary of State, including Articles of Organization and Operating Agreement. These filings ensure that the LLC is operating legally and provide proof of membership to potential creditors. Without these filings, the LLC is considered inactive and cannot operate.
If you’re thinking about forming an LLC, make sure you take steps to protect yourself against losing your LLC status. You’ll want to consult with an attorney experienced in LLC formation and maintenance to help you prepare the necessary forms and retain professional assistance to complete the registration process.
Frequently Asked Questions
What does it cost to set up an LLC in New Mexico?
New Mexico’s LLC filing fee is $100.00 per year. This includes annual renewal fees and any additional filings. There is no charge for filing an initial application. However, each subsequent amendment requires a separate filing fee.
If you plan to operate your business out-of-state, then you should consider registering your LLC in the state where you intend to conduct business. Doing so will save you time and money.
How long does it take to form an LLC in New Mexico?
Filing an LLC in New Mexico usually takes 1-2 weeks. It may take longer depending on how many other entities you have registered at the same time.
James Rourke is a business and legal writer. He has written extensively on subjects such as contract law, company law, and intellectual property. His work has been featured in publications such as The Times, The Guardian, and Forbes. When he’s not writing, James enjoys spending time with his family and playing golf.