Licensed professional? Level up your business with New Mexico professional corporation! Enjoy unique benefits like New Mexico LLC, such as limited liability, tax perks, and a polished image. Our step-by-step guide unravels the essentials for smooth compliance and the right fit. LLCBase has your back with expert guidance, so make an informed decision and triumph in New Mexico with your professional corporation today!
This guide will review the requirements for starting a professional corporation in New Mexico, explore the advantages and disadvantages of this business structure, and help you determine if it is the right fit for your business goals.
On this page, you’ll learn about the following:
- What is a Professional Corporation
- Starting a Professional Corporation in New Mexico: A Guide
- Step 1: Appointment of Registered Agent
- Step 2: Choosing the Name of the Corporation
- Step 3: Drafting of By-laws
- Step 4: Appointment of Board of Directors
- Step 5: Conduction of Board Meetings
- Step 6: Issuance of Corporate Shares
- Step 7: Comply with State Requirements
- Step 8: Filing of Statement of Information
- Step 9: Getting Tax Permits from the State
- Step 10: Opening of a Bank Account
- Fees Associated with Professional Corporation in New Mexico
- Taxation of Professional Corporations
- Alternatives to Professional Corporations in New Mexico
- FAQs
What is a Professional Corporation
A Professional Corporation (P.C.) is a unique type of corporation designed for licensed professionals, such as doctors, dentists, lawyers, architects, and accountants. Forming a P.C. allows licensed professionals to offer their services through a corporate structure, providing them with the benefits of a traditional corporation, such as limited liability protection and tax advantages. Forming a professional corporation in New Mexico is a popular choice due to the thriving professional landscape and business-friendly environment. When starting a professional corporation, choose a reliable formation service in New Mexico.
The primary purpose of New Mexico Professional Corporation is to protect its owners from personal liability for the corporation’s actions. The shareholders’ personal assets are protected if the professional corporation faces legal issues. Moreover, New Mexico professional corporations can offer certain tax benefits, such as deducting employee benefits and operating expenses. These advantages make forming a professional corporation an attractive option for many professionals in New Mexico.
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Who Can File Under Professional Corporation Laws
Under New Mexico Professional Corporation laws, only certain licensed professionals are eligible to form a professional corporation. The specific professions allowed to form a P.C. may vary slightly by state, but in New Mexico, the following professionals can typically form a professional corporation:
- Physicians and Surgeons
- Dentists
- Chiropractors
- Optometrists
- Podiatrists
- Certified Public Accountants
- Architects
- Engineers and Land Surveyors
- Psychologists
- Marriage and Family Therapists
- Clinical Social Workers
- Professional Clinical Counselors
- Veterinarians
- Attorneys
- Speech-Language Pathologists
- Pharmacists
- Registered Nurses
- Physical Therapists
- Occupational Therapists
- Acupuncturists
Each profession has its governing licensing board, which sets specific rules and regulations for forming and operating a professional corporation. It is essential to check with the relevant board and state laws to ensure that your profession is eligible to form a professional corporation and to understand the specific requirements associated with your profession.
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Structure of a Professional Corporation
- Shareholders: New Mexico Professional Corporation’s shareholders must be licensed professionals in the same field as the corporation’s purpose. For example, if a professional corporation is formed to offer legal services, all shareholders must be licensed attorneys. This requirement ensures that the professional corporation’s management comprises qualified individuals with relevant expertise.
- Directors: The directors of a professional corporation in New Mexico are responsible for overseeing the corporation’s operations and making high-level decisions. The directors must also be licensed professionals in the same field as the corporation’s purpose. The number of directors required depends on the specific licensing board’s regulations, but typically a minimum of one director is needed.
- Officers: The officers of New Mexico Professional Corporation manage the professional corporation. Officers typically include a President, Secretary, and Treasurer. However, additional officers can be appointed as needed. While not all officers must be licensed professionals, the President must hold a valid license in the same field as the corporation’s purpose.
Starting a Professional Corporation in New Mexico: A Guide
Here is a detailed guide to starting a professional corporation in New Mexico that you should follow.
Step 1: Appointment of Registered Agent
The first step in forming a Professional Corporation is appointing Registered Agent in New Mexico. This individual or company will act on behalf of the corporation, receiving official notices and legal documents. The agent must have a physical address in New Mexico and be available during regular business hours.
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Step 2: Choosing the Name of the Corporation
Selecting a name for your New Mexico Professional Corporation is crucial. The name must be unique and appropriate, including the words “professional corporation” or the abbreviation “P.C.” It must also comply with the rules and regulations of the governing licensing board and should not be confusingly similar to an existing corporation’s name.
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Step 3: Drafting of By-laws
By-laws are the internal rules and regulations governing the management and operations of the professional corporation. These should include provisions related to the appointment of directors, issuance of shares, and any restrictions imposed by the licensing board.
Step 4: Appointment of Board of Directors
The board of directors oversees the management and operations of the New Mexico Professional Corporation. Directors must be licensed professionals in the same field as the corporation’s purpose.
Step 5: Conduction of Board Meetings
Regular board meetings are essential for maintaining the proper functioning and compliance of the professional corporation. The by-laws should specify the frequency, notice requirements, and procedures for conducting these meetings.
Shares represent ownership in the corporation. The professional corporation must issue shares to its shareholders, who must be licensed professionals in the same field. Share issuance should comply with the by-laws and any restrictions imposed by the licensing board.
Step 7: Comply with State Requirements
Forming New Mexico Professional Corporation requires compliance with specific state requirements, such as obtaining necessary permits and licenses, paying fees, and adhering to rules and regulations the governing licensing board sets forth.
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Step 8: Filing of Statement of Information
New Mexico professional corporations must file an annual report with the New Mexico Secretary of State. This document includes essential information about the corporation, including its name, address, Registered Agent, and directors.
Step 9: Getting Tax Permits from the State
The professional corporation must obtain the necessary tax permits from the New Mexico Taxation and Revenue Department, such as an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).
Step 10: Opening of a Bank Account
Finally, open a separate bank account for the New Mexico Professional Corporation to maintain proper accounting and financial records.
Fees Associated with Professional Corporation in New Mexico
Here are some of the most common fees when starting a professional corporation in New Mexico.
- State Laws and Regulations: To form a professional corporation in New Mexico, it is crucial to comply with the state laws and regulations governing professional corporations. The New Mexico Statutes Chapter 53 and the specific licensing board’s regulations for each profession outline the requirements and restrictions for professional corporation formation. Before starting the process, professionals should consult with their licensing board to ensure they meet the necessary qualifications.
- Incorporation Process: Once the licensing requirements are met, the next step to form a professional corporation in New Mexico is to draft and file the Articles of Incorporation with the New Mexico Secretary of State. This document includes essential information about the corporation, such as its name, address, purpose, and number of authorized shares. Filing the Articles of Incorporation requires a filing fee currently $100 for most professions. However, it is essential to check with the New Mexico Secretary of State for the specific fee associated with your profession.
- Naming Requirements: You must follow specific rules when choosing a name for a Professional Corporation in New Mexico. The name must include the words “Professional Corporation,” “P.C.,” or “Prof. Corp.” Additionally, the name cannot be misleading or too similar to an existing corporation’s name. Conducting a name search with the New Mexico Secretary of State is recommended to ensure the chosen name is available. This search is free, but reserving a name before filing the Articles of Incorporation requires a reservation fee of $20 online and $20 mail.
- Articles of Incorporation: The Articles of Incorporation is a critical document for forming a professional corporation in New Mexico. It outlines the corporation’s essential information, such as the name, address, purpose, and number of authorized shares. The Articles must also include a statement that the corporation is a professional corporation and the specific profession it practices. Once completed, the Articles of Incorporation must be filed with the New Mexico Secretary of State, accompanied by the appropriate filing fee.
- Additional Fees and Costs: In addition to the filing fees mentioned above, forming Professional Corporation in New Mexico may involve other costs, such as:
- Annual Report: professional corporations must file an initial Statement of Information with the New Mexico Secretary of State every In New Mexico, the annual report filing time is not applicable, as it is not a mandatory requirement. of filing the Articles of Incorporation. The filing fee for this form is $0 because it is not mandatory.
- Licensing and Permit Fees: Depending on the specific profession, the governing licensing board may require additional licensing and permit fees.
- Registered Agent Fee: Hiring of Registered Agent service will likely involve an annual fee of $50 – $150, which can vary depending on the service provider.
- Legal and Accounting Fees: Forming a professional corporation may involve consulting with attorneys and accountants, which can result in additional professional fees.
Advantages of a Professional Corporation
- Limited Liability Protection: One of the main benefits of a professional corporation is its limited liability protection to its shareholders. This means the shareholders’ assets are protected from the corporation’s debts and liabilities.
- Tax Benefits: Professional Corporations enjoy specific tax benefits, such as deductions for business expenses and the ability to retain earnings within the corporation.
- Business Credibility: Operating as a professional corporation can enhance the credibility and reputation of the professional services, demonstrating a commitment to compliance and professionalism.
- Continuity of Operations: A professional corporation has a perpetual existence, ensuring the continuity of operations even if the shareholders or directors change.
Disadvantages of a Professional Corporation
- Complexity and Cost of Formation: Forming a professional corporation can be more complex and costly than other business structures, such as sole proprietorships or partnerships.
- Ongoing Compliance Requirements: professional corporations must adhere to ongoing compliance requirements, including regular board meetings, filing annual reports, and maintaining proper records.
- Limited Flexibility in Management: professional corporations may need more flexibility in management, as the board of directors must consist of licensed professionals in the same field.
Taxation of Professional Corporations
Here are the taxes that your professional corporation must pay in New Mexico:
Federal income tax
A professional corporation in New Mexico is subject to federal income tax on its net earnings. However, a P.C. can elect to be taxed as an S corporation, which allows the corporation’s income, deductions, and credits to pass through to the shareholders. This can result in significant tax savings by avoiding double taxation.
State taxes
New Mexico Professional Corporation is also subject to state taxes, such as the New Mexico franchise tax, which is based on the corporation’s annual net income. Additionally, depending on the nature of its operations, the professional corporation may be subject to other state and local taxes, such as payroll and sales taxes permit in New Mexico.
Tax deductions and exemptions
A professional corporation in New Mexico can take advantage of various tax deductions and exemptions, such as deductions for employee benefits, operating expenses, and depreciation. These deductions can help reduce the corporation’s taxable income, ultimately leading to tax savings for the P.C. and its shareholders.
Alternatives to Professional Corporations in New Mexico
If you decide that a professional corporation is not for you, then you might consider the following alternatives.
- Sole Proprietorships: A simpler business structure is where an individual operates the business under their name without limited liability protection.
- Partnerships: Two or more individuals join to operate a business, sharing profits, losses, and responsibilities.
- Limited Liability Companies (LLCs): A hybrid business structure that combines the limited liability protection of a corporation with the tax benefits and flexibility of a partnership.
- S-corporations: Starting an S Corp in New Mexico avoids double taxation by allowing income, losses, and deductions to pass through to the shareholders’ personal tax returns.
FAQs
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How to Save Money While Forming New Mexico Professional Corporation
One of the first ways to save money when forming a professional corporation in New Mexico is to do your research. Before diving headfirst into the process, take the time to educate yourself on the requirements and regulations for setting up a professional corporation in the state. By understanding what is needed and what steps must be taken, you can avoid any costly mistakes that may arise from misinformation. Additionally, doing your own research can help you determine which aspects of the formation process you can handle yourself, thus saving money on legal fees.
Another way to save money when forming a professional corporation in New Mexico is to consider using a formation service. While hiring a lawyer to handle the entire process can be costly, utilizing a formation service can be a more budget-friendly alternative. These services can help guide you through the steps needed to set up your professional corporation while providing assistance with paperwork and other necessary tasks. By using a formation service, you can save money on legal fees while still ensuring that your professional corporation is set up correctly.
Additionally, when forming a professional corporation in New Mexico, it is important to consider the structure of your business carefully. By choosing the right structure for your professional corporation, you can potentially save money on taxes and administrative costs in the long run. Consulting with a financial advisor or accountant can help you determine which structure is best suited for your business and goals, ultimately saving you money in the future.
Furthermore, when forming a professional corporation in New Mexico, it is essential to be mindful of unnecessary expenses. Before moving forward with any aspect of the formation process, take the time to review all costs associated with setting up your professional corporation. By identifying and eliminating any unnecessary expenses, such as expensive office space or extravagant marketing campaigns, you can save money while still creating a professional and reputable business entity in the state.
In conclusion, forming a professional corporation in New Mexico does not have to drain your bank account. By doing your research, considering a formation service, choosing the right business structure, and being mindful of unnecessary expenses, you can save money while still establishing a successful professional corporation. Taking these steps can help ensure that your business is set up correctly and in compliance with all state regulations, all while keeping costs down.
Conclusion
New Mexico Professional Corporation can offer several benefits for licensed professionals. However, it is essential to carefully consider the proper structure and compliance requirements before proceeding. Seeking professional guidance in forming a professional corporation can help ensure a smooth process and enable professionals to focus on providing their services. Visit LLCBase for more information about starting a professional corporation in New Mexico.