If you've started selling your homemade jewelry online or running personal training sessions out of your garage, you've likely formed a sole proprietorship already—and you're not alone. When an individual starts a business (sells goods or services) and that person hasn't filed any legal documents with the state officially registering the business, then the person has automatically created a sole proprietorship.
A sole proprietorship is low maintenance. It doesn't typically require you to file any creation documents or submit renewal filings or fees, and you can usually report your income on your personal tax return. But sole proprietors are personally liable for the business's debts and obligations, so you might need to dip into your personal funds to satisfy any debts your business can't pay.
In New Mexico, you can establish a sole proprietorship without filing any legal documents with the New Mexico state government. Though no action is required to legally create a sole proprietorship, you should follow four simple steps to start your business:
For more information, read our article on how to start a business in New Mexico.
In New Mexico, a sole proprietor can use their own legal name or a trade name—also sometimes known as an "assumed business name" or "doing business as" (DBA)—to conduct business. If you plan to use a DBA or trade name for your business, it shouldn't be the same name as any other company currently registered with the state.
It's also a good idea to choose a name that's not too similar to another registered business to avoid trademark infringement. Under trademark law, your trade name can't be used by someone else in a way that would cause confusion among consumers. So, if you use a name that's the same as or too similar to someone else's trademark and you both provide similar goods or services, then you could be infringing on that other person's trademark. If you find a competitor company already exists with a similar name, then it's best to choose another name.
For example, suppose you want to operate a taco stand under the name Magical Flour and Mesa Soft Shell. But in a nearby town, there's a restaurant called Magic Flour Mesa Soft Tacos. Because your taco stand would have a similar name to a restaurant that already exists, you should choose a different name.
To make sure your business name is available, you should run a search in the following government databases::
For more information, read our FAQ on how to choose and register a business name.
In New Mexico, unlike most other states, if you use a business name that's different from your legal name, you're not required to register that DBA with the state. But you might want to check with your city or county government to ensure there's no local business name registration requirement.
For instance, suppose Larry Snell operates a lawn mower repair service in his garage under the name Happy Reliable Mower Repairs. Because Larry's business name, Happy Reliable Mower Repairs, isn't the same as his legal name, he might find that his local government expects him to register the business name.
Registering your DBA might have some potential benefits such as:
Depending on your business activities, you could need to apply for business or professional licenses. You can apply for and renew your professional license or permit online at the New Mexico Regulation and Licensing Department (RLD) website. The RLD has links to various divisions, boards, and commissions that regulate professions and industries.
For each board and commission, the RLD provides details about the following topics:
You might also need to comply with local regulations, building permits, and zoning laws. Check with your city and county governments for more information.
Sole proprietors who wish to have employees need to obtain an 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 an EIN. You can register for an EIN online with the IRS.
Sole proprietors without employees aren't required to have an EIN. Instead, you can use your Social Security number to report taxes. Nevertheless, you might want to obtain an EIN. Some banks require an EIN to open a bank account, and having an EIN can reduce the risk of identity theft.
In New Mexico, businesses are required to report taxes and file various employee reports. You might need to use your EIN when reporting business taxes. If you have employees, you must report and pay employment taxes on a periodic basis.
You should consider taking the following additional steps once you've started your sole proprietorship:
To find out how to form a sole proprietorship in any other state, see our 50-state guide to establishing a sole proprietorship.
You might not need to submit paperwork to start a sole proprietorship in New Mexico. But your specific circumstances could require you to file certain forms and comply with certain rules and regulations. As a business owner, it's important to understand what steps you need to take to legally start and operate your sole proprietorship.
If you have business experience and only need to meet a few requirements to establish your sole proprietorship, you can probably do the work yourself. But if you need specific guidance or run into a complicated issue when starting your business, you should talk to a small business lawyer. They can help you register your name, file your taxes, and obtain licenses and permits.