Why start a New Mexico Corporation?
The reasons people choose to incorporate in New Mexico are due to its many advantages. The most important reason to incorporate is to have that protection of your personal assets. In any case, the shareholders are not personally liable for any of the corporation’s losses. Unlike a corporation, a creditor can go after the owner of a sole proprietorship or partnership’s personal assets if there isn’t enough to settle a claim against the company.
Other advantages of forming a corporation are:
- A New Mexico Corporation will continue to do business in the state even if the owner dies or wishes to sell their interest. The duration of the corporation will be perpetual;
- It’s easy to transfer ownership of the corporation. You must follow any security laws to do so first.
- In some cases, forming a corporation can reduce taxes, but only under certain circumstance.
Key guidelines in naming your corporation
Corporations may use the designators Inc, Corp, Corporation, and Incorporated. The corporation name must be distinguishable from any other corporation already on file with the Secretary of State. Though most states do not recognize words such as, “the, and, etc.” as distinguishing from another company, New Mexico also does not find similar words in Spanish such as “el, las, los, etc” distinguishing from other company names either. Therefore if you were trying to file “Los Amigos Inc”, and there is already an existing entity called “Amigos Inc”, it would be unavailable because the state would ignore the word not find the word “Los” distinguishing.
How to Maintain Corporate Status?
Most businesses in New Mexico must register with the New Mexico Taxation and Revenue Department, and may require paying gross receipts tax as well as income tax on taxable income of the business. The business will be required to file quarterly reports with the New Mexico Taxation and Revenue Department if the company is required to provide Workers Compensation when you have employees. By forming a corporation, you are also required to have annual meetings with the shareholders of the corporation. This you will have to document in minutes and keep for your company records. Local governments may also have special permit requirements for certain businesses. You will have to contact the county government in which your business is located to find the type of licenses you will need for your business. , forming a corporation can reduce taxes, but only under certain circumstance.
Why set up a company as a subchapter S corporation?
Once you have established your corporation according to your states requirements, you elect S corporation status for federal tax purposes by filing Form 2553 (PDF), Election by a Small Business Corporation. Several requirements must be met before you can elect S corporation status.
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