In New Mexico, you can establish a sole proprietorship without filing any legal documents with the New Mexico state government. There are four simple steps you should take:
To find out how to establish a sole proprietorship in any other state, see Nolo’s 50-State Guide to Establishing a Sole Proprietorship.
1. Choose a Business Name
In New Mexico, a sole proprietor may use his or her own given name or may use a trade name. If you plan to use an assumed name or trade name, it is important to choose a name that is distinguishable from the name of another company currently on record to avoid confusion. It is also a good idea to choose a name that is not too similar to another registered business because of common and federal law trademark protections. To make sure your business name is available, run a search in the following government databases:
2. File a Trademark
If you use a business name that is different from your legal name, New Mexico does not provide a method for recording your trade name. Your trade name will be required on other applications such as business registrations forms and tax applications. However, if you are using your trade name as a part of a product or service that you offer to the public, you may be able to register your business name as a trademark. The New Mexico Secretary of State has more information on filing your business name as a trademark.
3. Obtain Licenses, Permits, and Zoning Clearance
Your business may need to obtain business licenses or professional licenses depending on its business activities. New Mexico does not provide a comprehensive website of every profession and occupation that requires a license by any sole proprietorship. However, the New Mexico Public Regulation Commission can help you obtain the necessary information to be fully licensed in New Mexico. In addition, local regulations, including licenses, building permits, and zoning clearances, may apply to your business. You will need to check with your city and county governments for more information.
4. Obtain an Employer Identification Number
Sole proprietors who wish to have employees need to obtain an Employer Identification Number, or EIN. This is a nine digit number issued by the IRS for tax reporting purposes. All businesses with employees are required to report wages to the IRS using their EIN. Registering for an EIN can be done online at the IRS website.
Sole proprietors without employees are not required to have an EIN because they can use their Social Security number to report taxes. Nevertheless, you may want to obtain one anyway for your business. Some banks require one to open a bank account and it can reduce the risk of identity theft.
In New Mexico, businesses are required to report taxes and file various employee reports. You may need to use your EIN when registering your business to report taxes through the New Mexico Taxation and Revenue Department. If you have employees, you must report and pay employment taxes on a periodic basis. More information related to employment taxes can be obtained by from the New Mexico Employer Responsibilities Brochure.
It is important to consider doing the following once you have established your sole proprietorship: