1. Local Zoning Laws and Regulations in New Mexico
New Mexico is home to 33 counties and numerous municipalities, each with its own set of zoning regulations. Before finalizing a location for your therapy practice, whether it’s within your own home or a commercial space, it is crucial to ensure compliance with local zoning requirements.
In situations where your chosen area has zoning restrictions that typically prohibit business operations, such as operating a therapy practice in a residential zone, you may explore the possibility of applying for a zoning variance. A zoning variance allows for exceptions to be made to the existing zoning laws to accommodate specific circumstances.
To determine if you need to pursue a zoning variance, understand the recognized zoning types within your specific town or city, and learn about the permissible types of businesses in each zone, it is advisable to reach out to your local municipality. They can provide you with accurate information and guidance on zoning regulations applicable to your chosen location within New Mexico’s 33 counties and various municipalities.
2. Business Name Search in New Mexico
To register a business name in New Mexico, you must complete the necessary registration with the state. There are several options available, including forming an LLC or corporation, or filing for a “doing business as” (DBA) name with the state’s business division.
When registering a business name, it is crucial to ensure its uniqueness and verify that no other entity in the state has already registered a company under that name or has control of it as a domain name online.
It is strongly recommended to conduct a domain name search to check the availability of your business name as a web domain (URL). Even if you don’t currently plan to create a business website, acquiring the web address can prevent others from obtaining the domain name. If the web domain is available, it is likely that the name is also available for business registration.
Next, utilize the New Mexico Secretary of State business search tool to conduct a search specific to the state. This step is essential because your filing will be rejected if you attempt to register a name that is already in use by another entity.
Please note that the search requirements may vary depending on your specific business needs. For formal business structures such as LLCs and corporations, a unique and available name is mandatory for registration. However, for informal business structures like sole proprietorships or general partnerships in New Mexico, a state-level name search is not required.
By conducting a thorough business name search and ensuring the availability and uniqueness of your desired name, you can proceed with the registration process and establish your business in New Mexico.
3. Business Structure in New Mexico
When starting a business in New Mexico, you have three primary business structure options to choose from: sole proprietorship, limited liability company (LLC), and C corporation. Each structure has its own advantages and considerations related to personal liability, ownership, taxation, and funding. Here’s a breakdown of their differences:
- Sole Proprietorship:
- Informal business structure where the owner and the business are considered the same entity.
- No legal paperwork is required to establish a sole proprietorship in New Mexico.
- The owner retains all the profits generated by the business.
- However, the owner assumes personal liability, which means they are personally responsible for any business debts or legal obligations. In the event of a lawsuit, the owner’s personal assets may be at risk.
- LLC (Limited Liability Company):
- A formal business structure owned by individuals known as “members.”
- Provides personal liability protection to its members, separating their personal assets from the company’s liabilities.
- If the LLC is sued, the lawsuit is directed at the company rather than its members. Thus, personal assets are generally protected.
- LLCs are treated as pass-through tax entities, meaning the profits and losses of the business are passed through to the individual members, who report them on their personal tax returns.
- C Corporation (Corporation):
- A legal business entity owned by shareholders.
- Offers advantages such as the ability to easily welcome new owners, sell the business, and raise capital.
- Provides personal liability protection to shareholders, separating their personal assets from the company’s liabilities.
- The assets and property of the corporation are owned by the company, not the shareholders individually.
- Corporations are subject to corporate tax rates, which differ from personal income tax rates. In New Mexico, the corporate tax rate ranges from 4.8% to 5.9%.
- Corporations have additional requirements, such as appointing boards of directors, holding regular meetings, and adhering to more complex tax reporting.
Choosing the most suitable business structure for your New Mexico business depends on factors like personal liability concerns, desired ownership structure, tax considerations, and long-term growth plans. It’s recommended to consult with a legal or tax professional to assess your specific situation and determine the best option for your business.
4. Register Your Business in New Mexico
Once you have decided on your business structure and chosen a name, the next step is to register your business with the state of New Mexico. Here’s an overview of the registration process for LLCs and corporations:
File the Articles of Organization: Prepare and file the Articles of Organization with the New Mexico Secretary of State. This document outlines essential information about your LLC, such as its name, registered agent, and purpose. You can submit the Articles of Organization online through the Secretary of State’s website.
File the Articles of Incorporation: Complete and file the Articles of Incorporation with the New Mexico Secretary of State. This document contains details about your corporation, including its name, registered agent, purpose, and shares of stock. You can find the necessary forms and instructions on the Secretary of State’s website.
Remember to carefully follow the instructions provided by the state and double-check all the information before submitting your formation documents. Pay any required fees associated with the filing process. Once your documents are accepted, your LLC or corporation will be officially registered with the State of New Mexico.
It’s recommended to consult with a legal or business professional to ensure you meet all the legal obligations and to guide you through the registration process.
5. Business Licenses & Permits in New Mexico
In New Mexico, the requirement for a business license depends on the type of business you are operating. Here’s an overview of the licensing requirements:
- Business Entity Registration: If you are forming a corporation or LLC, you must register your business entity with the New Mexico Secretary of State. However, sole proprietorships and partnerships do not need to register at the state level.
- New Mexico Business Tax Identification Number: All businesses in New Mexico must apply for a New Mexico Business Tax Identification Number through the New Mexico Taxation and Revenue Department. This number is used to record, collect, and pay taxes on your business’s gross receipts, with a few exceptions.
- County and City Licenses: Many business licenses are issued at the county or city level. You need to coordinate with the local authorities where your business is located to determine which licenses and permits are required for your specific business. The requirements may vary depending on the type of license and the locality. Some common licenses include:
- Standard commercial business license: Required for businesses that rent or own commercial space.
- Home-based business license: Required for businesses operating from a residential address.
- Cannabis business license: Required for businesses selling cannabis, subject to state and city zoning approvals.
- Alcoholic Beverage Control Division Liquor License: Required for businesses selling alcoholic beverages.
- Tobacco license: Required for businesses selling tobacco products.
- Food permits: Required for businesses involved in food preparation or handling.
- Professional licenses: Certain professions may require specific licenses and permits issued by the state.
- Federal and Other Licenses: Depending on the nature of your business, you may also need to obtain federal licenses or permits. It’s advisable to check with the Small Business Administration for information on federal requirements.
To obtain a New Mexico Business Tax Identification Number, you can use the online system or submit a paper application by mail or email. Most people opt for the online system, but paper applications are also accepted. The necessary forms and instructions can be found on the New Mexico Taxation and Revenue Department’s website.
For other licenses and permits, you will need to follow the specific requirements of the county or city where your business is located. Be sure to check with the respective local authorities for the application process and any associated fees.
Remember to comply with all licensing requirements before starting operations in each new location, and ensure that you have the necessary licenses and permits for your business to operate legally in New Mexico.
6. Business Insurance in New Mexico
Business insurance plays a crucial role in protecting your business from potential disasters and liabilities. While some types of insurance, such as workers’ compensation, are legally required, most business insurance is optional. It’s essential to select the insurance coverage that aligns with your business’s needs and level of risk.
Here are some common types of business insurance:
- Workers’ Compensation Insurance: In New Mexico, employers are generally obligated to provide workers’ compensation coverage for their employees. This insurance helps alleviate the financial burden in case of work-related injuries, covering medical expenses, temporary disability, and lost wages. While businesses with fewer than three employees are exempt (except for Construction Industries Licensing Act (CILA) businesses), it remains a vital consideration.
- Liability Insurance: This coverage handles claims against your business for injuries or property damage suffered by others, such as clients or customers. It includes costs like medical expenses, legal fees, settlements, and judgments. The necessity of liability insurance depends on the likelihood of your business being sued and the extent of assets you need to protect. Specific types of liability insurance, such as professional, cyber, commercial, home-based business, or product liability insurance, can be added or purchased based on your requirements.
Choosing the right insurance coverage is an important aspect of safeguarding your business’s future and mitigating potential risks. Consider your business’s unique circumstances and consult with an insurance professional to determine the most suitable coverage for your needs.
7. Business Taxes in New Mexico
In New Mexico, corporations that are required to file a federal corporation income tax return and generate income from activities or sources within the state are subject to New Mexico corporate income tax. This tax applies to the net income of corporations engaged in business transactions, property ownership, or employment in New Mexico. The following entities are considered “corporations” for the purposes of New Mexico corporate income tax:
- Domestic corporations
- Foreign corporations
- Joint-stock companies
- Real estate trusts organized under the Real Estate Trust Act
- Financial corporations
- Banks or other business associations
- Limited liability companies or partnerships taxed as corporations under the U.S. Internal Revenue Code
Additionally, businesses in New Mexico may have employment tax obligations, specifically wage withholding tax. If your business has employees who are New Mexico residents performing services within or outside the state, or certain nonresidents providing services within the state, you are likely required to withhold taxes from their wages. The amount of tax withheld depends on the number of allowances claimed by the employee and the frequency of wage payments.
While income and withholding taxes are important, there are other taxes your business may need to pay. In New Mexico, instead of a specific sales tax, there is a gross receipts tax imposed on persons and entities engaged in business. The tax rate varies depending on the location of the business, ranging from 5.125% to 8.8675%.
Unemployment insurance contributions are another tax obligation for businesses. Employers are required to contribute to an unemployment reserve fund to support eligible unemployed workers. The contribution rate for new employers with less than two years of experience is the greater of 1% or the industry average unemployment insurance contribution rate.
Additional taxes may apply based on the goods and services provided by your business, such as compensating tax, workers’ compensation, and extraction taxes on oil, natural gas, and minerals. It’s important to check for any specific tax requirements in local municipalities where your business operates.
Before filing your business taxes in New Mexico, gather the necessary information, including your business EIN, accounting records, invoices, receipts, and legal documents related to your business operations. You can file your taxes electronically through the New Mexico Taxation and Revenue Department’s Taxpayer Access Point (TAP) system by setting up an account online for secure and efficient tax filing.