Frequently Asked Questions

Frequently Asked Questions - New Mexico LLC

Disclaimer: We do not give legal or tax advice. The following information is offered only as a point of view. You are encouraged to evaluate this information and act according to your own research and conclusions. Because we encourage independent thought and personal responsibility, we do not accept credit nor liability for the use or misuse of this information.

1. How does the New Mexico LLC compare to Nevada Corporations or Delaware Companies?

2. Do I need a Tax ID Number for my company?

3. Does my business or personal residence have to be in New Mexico?

4. Can I use a New Mexico LLC to avoid taxes?

5. Do I need to file Annual Reports or pay Annual Fees to the State of New Mexico for my LLC?

6. Do I need to pay Gross Receipts (sales) taxes to New Mexico?

7. Do I need to file personal or business tax returns to the State of New Mexico?

8. How many LLC's can I own?

9. What is an "Operating Agreement"?

10. Are you sure there is no public record of who owns the LLC?

11. What else can you tell me about the New Mexico LLC?

12. If I file for an LLC in New Mexico, do I also have to file or register it in my home state as well?

13. In your opinion is the NM LLC better than a Land Trust or Living Trust?

14. If I place assets in an LLC, and these assets are included in my will, if my plane crashes, how is this dealt with by the courts since I don't "own" the assets?

15. I spoke with my insurance agent about putting my vehicle in LLC and they said my insurance would go up. My question is there any way around rising insurance rates?

16. I'm also looking into buying a house soon and was curious , should I buy the house in my name then move it to a LLC, or put it into a LLC to start with?

17. Should I take care of all of the transactions ( signing papers ect.) for purchasing the house or should I get someone else to do that so I keep my privacy?

18. How do you go about putting your house into the LLC? Would I just go to the title company and put it on the deed and take my name off? Are there any fees involved besides the title company's fee?

19.  How do I avoid paying a "transfer fee" and/or avoid a new property tax assessment when I deed my property out of my name and in the New Mexico LLC? 

20. When I transfer my real estate from my name to the LLC do I have to worry about the "due on sale" clause that is written into my mortgage?

21. How to I put a "friendly lien" on my real estate? 

22. Where do I go to get copies of my real estate deeds?

23. Can the Registered Agent receive mail for me?

24. What IRS Reporting Requirements do I have for my LLC?

25. Also, how do you put a "friendly lien" on an automobile?

26. Tell me again, why should I get a New Mexico LLC? 

27. How do I check the status of my LLC order?

28. Being I am a resident of my home state and I will be forming an LLC through NM and will be conducting my business in my home state, what details are generally required to be provided to the state in which I will be conducting my business?

29. If I choose to sell my LLC to a friend,or another LLC, can this transaction remain private? Can the new owners identity remain private? What would be the process?

1. How does the New Mexico LLC compare to Nevada Corporations or Delaware Companies? 

The New Mexico LLC offers all the benefits of Nevada and Delaware entities at a fraction of the cost.  In fact, no other state offers the degree of privacy and low cost of New Mexico. A few of these benefits are anonymity, legal protection, and flexibility.  Additionally, LLCs are much easier and cheaper to maintain than corporations while offering every bit of the liability protection. Both Nevada and Delaware require Annual Fees and Reports whereas New Mexico does not. Nevada LLC's require personal information and Nevada Corporations involve hiring nominee officers and directors. New Mexico does not have these restrictions.

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2.  Do I need a Tax ID Number for my company?

Typically only if you are engaged in taxable activity, have employees, or if you need a Tax ID number for banking purposes. Our Members Area of our website (which comes with your LLC order) will show you how to get your Tax ID Number.

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3.  Does my business or personal residence have to be in New Mexico?

No.

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4.  Can I use a New Mexico LLC to avoid taxes?

The New Mexico LLC can be operated so that it has no tax liability. Members of the LLC are responsible for reporting their share of profits on their personal tax return (if applicable) and paying the taxes that they are liable for. A limited liability company is a powerful tool that can help you minimize taxes.  Simply having your own business can be one of the most powerful tax shelters available since it allows you to take numerous tax deductions that are otherwise not available at the personal level.  Consult your tax advisor if you need advice concerning your personal tax situation.

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5.  Do I need to file Annual Reports or pay Annual Fees to the State of New Mexico for my LLC?

No.  The only annual fee is to the Registered Agent in the amount of $100 per year.

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6.  Do I need to pay Gross Receipts (sales) taxes to New Mexico? 

Generally speaking, only if you "transact business" in New Mexico.  Visit http://www.state.nm.us/tax/ and consult your tax advisor for more information. 

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7.  Do I need to file personal or business tax returns to the State of New Mexico?

On the personal level: Generally, only if you are a resident of the state of New Mexico and receive income through your LLC. On the business level: Generaly, only if your LLC derives income from within New Mexico.  Visit http://www.state.nm.us/tax/ or consult your tax advisor for more  information.   

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8.  How many LLC's can I own?

There is no limit.

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9.  What is an "Operating Agreement"?

The Operating Agreement is a private agreement between the owner(s) of the LLC.  It specifies how the LLC is to be operated.  We have developed some of the most powerful Sample Operating Agreements that will come with your LLC order.  This document is only disclosed to those that you wish to disclose it to.  

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10. Are you sure there is no public record of who owns the LLC?

Absolutely!  Not even the state knows who owns the LLC unless you choose to disclose that to them.  With Bearer Membership Certificates you can achieve an even higher level of privacy and asset protection.

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11.  What else can you tell me about the New Mexico LLC?

The New Mexico LLC is a low-profile, extremely affordable (some asset protection entities are priced in the tens of thousands which is totally unnecessary), and is a "top shelf" asset protection tool.  It is the entity of choice for those seeking ultimate asset protection and privacy.  

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12. If I file for an LLC in New Mexico, do I also have to file or register it in my home state as well?

It depends on how you will be using the LLC. The rules vary for different types of businesses but, if your LLC is doing limited business, is a holding company, or if it will be holding title to real estate - you will likely not need to register it in any other state.  Most states, if not all, only require you to register as a "foreign LLC " if you meet their definition of "transacting business within the state". It is relatively easy to structure the LLC so that it does not meet the definition of "transacting business".

 If your business does meet the registration requirement then you can go ahead and register it but then have another NM LLC own it. This can allow you to maintain the privacy and asset protection benefits of the New Mexico LLC.

If you will be opening a "bricks and mortar" business with a storefront, you will most likely need to register your LLC with the state that it will physically be located in. In this case, you can use a separate LLC to "strip the equity" out of it (see "friendly lien" and "equity stripping" in our Crash Course).

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13.  In your opinion is the NM LLC better than a Land Trust or Living Trust?

In most cases .  A trust requires a Trustee, a Settlor, and Beneficiaries. This takes a little extra effort to set up and the problem is that someone else knows your business (the Trustee) and you have to pay them even if payment is only in the form of increased "love and affection" toward a family member or friend  who does it as a "favor". You also have to "trust" this person because they have power to convey the assets of the trust. Trusts must also be set up with a limited duration of existence (although our Belize Trust allows a duration of 120 years). New Mexico LLC's can be set up to have perpetual existence. Most trusts, including land trusts and living trusts, are "revocable" trusts. This means that a creditor can force you to revoke the assets that you transferred and bring them back within their reach.

Basically, a New Mexico LLC acts like a trust without the need for a Trustee.  With a New Mexico LLC you can be both the Manager and the Owner (also known as the Member or Beneficiary).  

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14.  If I place assets in an LLC, and these assets are included in my will, if my plane crashes, how is this dealt with by the courts since I don't "own" the assets?

There are two ways that this can be handled:

1.  You actually own the LLC (like shares of stock - in this case they are called "Membership Interests").  These Membership Interests are assets and they can be included in your will or owned by a living trust.

2.  You might also use this unconventional approach:

Select a trusted friend/relative (whoever you want to control the asset after your death) to be a "Co-Manager " or "Successor Manager" of your LLC's.  Structure the LLC so that the Members (owners of the LLC) are third persons or entities (such as another New Mexico LLC).  This is written into your Operating Agreement. After your death, the "Successor Manager" simply shows the bank the death certificate and they take over as signer of the account (you can also add them as signers while you are still living).  Because they are now the "Manager" of the company they have the power to "bind" the company.  This means they can buy, sell or transfer any assets of the company including deeds (real property) and personal property.

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15. I spoke with my insurance agent about putting my vehicle in LLC and they said my insurance would go up. My question is there any way around rising insurance rates?

Yes, list your name on the policy as "[your name] dba [your LLC name]". If asset protection (of your vehicle) is your only concern then you can leave the car in your name and have your LLC put a "friendly lien" on it.

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16. I'm also looking into buying a house soon and was curious , should I buy the house in my name then move it to a LLC, or put it into a LLC to start with?

If you are getting new financing in your own name it is most likely that the lender will want your name on the loan and title. In this case you would wait until after purchasing the property in your name and then you simply deed it over to your LLC.

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17. Should I take care of all of the transactions ( signing papers ect.) for purchasing the house or should I get someone else to do that so I keep my privacy?

Partially answered above. When buying a property you can sign on behalf of the company as "manager". Most deeds and mortgages (that are recorded in the public records) only show the name of the buyer which is the LLC. You can also designate someone else as "manager for the day" and simply terminate them after they have signed the necessary documents.

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18. How do you go about putting your house into the LLC? Would I just go to the title company and put it on the deed and take my name off? Are there any fees involved besides the title company's fee?

You can download a Warranty Deed from www.uslegalforms.com that is specific to your state. Enter your name (exactly as it appears on the deed you received when you bought the property) as Grantor, and enter your LLC name as Grantee. The LLC name should read like this: "[your LLC name], LLC, a New Mexico limited liability company". Enter the legal description exactly as it appears on the deed you received when you bought the property. If you cannot find your original deed, your title policy should have the full legal description.

Have your signature (as Seller) notarized and then record it in the County Clerk's Office of the county where the property is located. There should only be a nominal filing fee. If you have any questions or problems consult a paralegal, escrow/title company, or real estate lawyer.

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19.  How do I avoid paying a "transfer fee" and/or avoid a new property tax assessment when I deed my property out of my name and in the New Mexico LLC? 

Each state is different and some states have "transfer taxes". You can usually avoid these fees by showing the transfer agent (or tax assessor/county clerk) that you are still the owner of the LLC and that no material change in ownership has taken place. You can tell them you are changing title for asset protection and estate planning purposes. This is done when you take the deed down to be recorded in the county where your property is located. If you wish, at a later date, you can transfer the ownership of the LLC to someone else. This now becomes a "personal property" sale instead of a real property sale.

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20.  When I transfer my real estate from my name to the LLC do I have to worry about the "due on sale" clause that is written into my mortgage? 

We have transferred hundreds of properties and have never had a problem. Here's why: If the lender were to "call the loan due" they would take a perfectly good, performing loan and turn it into a problem, non-performing loan on their books. Banks don't want this because it affects their financial statements and it does not look good to their investors. All the bank cares about is that the payments are being made. If you make the payments you should never have a problem. If the payments are not being made then they will still come after you even if you transferred the property to an LLC. They will do this because you were the signer on the note and you are still personally liable. If you are still concerned about the possibility of the loan being called due, simply send the lender a letter and let them know that you are transferring the property into an LLC for estate planning purposes and that, if they object, to let you know in writing within "x" number of days. Otherwise, you will proceed with the transfer. When they don't respond, you are okay. Save this letter. Note: Make sure and add your LLC as an "additional insured" to your homeowner's insurance policy. Another side note: Banks do not have any one at the courthouse checking to see if title transfers.

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21. How to I put a "friendly lien" on my real estate? 

Download a mortgage document (or Trust Deed if you are in a Trust Deed state) from http://www.uslegalforms.com that is specific to your state. Enter your LLC name as Mortgagee (example: "ABC, LLC, a New Mexico limited liability company", Mortgagee) and your name as it appears on your title as "Mortgagor". Insert the legal description exactly as it appears on your original deed or title insurance policy. Have your signature notarized and then record the document at the County Courthouse (County Clerk) in the county where the property is located. In addition to the mortgage document or Trust Deed document you will need a Promissory Note which specifies the details of the loan. This document is not recorded. We like to structure the note as follows:

Principal Balance: [enter an amount equal to, or exceeding, your equity in the property]
Interest Rate: 10%
Payment Terms: No payments but loan will be payable on demand of the LLC.

Example: "Principal Balance of $100,000.00 shall earn interest at the annual rate of 10% and shall be due and payable on demand."

The benefit of structuring the note this way is that you don't have to make monthly payments that you have to try and keep track of. The note simply sits on the property accruing interest (offsetting inflation and appreciation) and is only "called due" when another creditor attempts to collect a debt against you. Since your "friendly lien" was recorded first, it has first claim on the equity. In effect, you would forclose on your property first (in the name of the LLC) before any other creditor can. Your LLC has first claim on the equity and whatever is left (if any) will be available to the other creditor. If you get to this point we recommend you consult a real estate lawyer to assist with the "friendly foreclosure".

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22. Where do I go to get copies of my real estate deeds?

You should have copies of your deeds in the paperwork you received from the title/escrow company when you closed on the purchase of the property. Your mortgage/trust deed documents and Title Insurance Policy should also list your legal description and names as they appear on the title.

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23. Can the Registered Agent receive mail for me? 

No. The Registered Agent does not receive or forward mail at this time although they may offer this service at some time in the future. We recommend that you rent a mail box with a street address (ie. Mail Boxes, Etc.) in your area to use for mail receiving purposes.

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24. What IRS Reporting Requirements do I have for my New Mexico LLC?

If you are subject to U.S. tax law you will have various reporting requirements (see www.irs.gov). Since everyone's situation is unique, you are encouraged to consult with your tax advisor regarding your personal situation.

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25. Also, how do you put a "friendly lien" on an automobile?

The vehicle must be free and clear. If it isn't then the current lender is holding the title and you will be unable to put another lien on it. To put a lien on the free & clear vehicle you must mail or take the title down to the DMV as the Manager of the LLC and tell them that you are the lender and that you would like it reflected on the title. They will re-issue the title with the lien in favor of your LLC. Typically they will mail the title back to your LLC at the address you desigate for your LLC.

26. Tell me again, why should I get a New Mexico LLC? 

The New Mexico LLC is a powerful tool that can help you keep your assets from those who seek to take your property without your voluntary consent. It is our pleasure to help you in this regard.

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27. How do I check the status of my LLC order?

1. Click on the following link: http://nmprc.state.nm.us/cii.htm

2. Enter the name of your LLC(s) into the search box. Once you see it show up on this site (usually within 3 weeks of placing your order), you will receive your documents within 4 to 5 days.

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28. Being I am a resident of my home state and I will be forming an LLC through NM and will be conducting my business in my home state, what details are generally required to be provided to the state in which I will be conducting my business?

It is best to see if you can structure your business so it doesn't meet the definition of "transacting business within the state" that way you would not have to register it in your home state.  Here is where you can find the definitions for most states:

http://protectyourassets.com//regex.pdf

If you can't find your personal loophole then I would suggest operating your business through a sole proprietorship or other entity from your state and then using the Invisible New Mexico LLC as a "holding" company which holds your assets but not your business.

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29. If I choose to sell my LLC to a friend, or another LLC, can this transaction remain private? Can the new owners identity remain private? What would be the process?

Absolutely, simply hand them the Articles of Organization and amend the Operating Agreement to show the new owners. You can also use the Bearer Certificates and Operating Agreement that come with your LLC. You would also want to change the names of the Managers on the Operating Agreement as well as on any bank accounts.

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