How I converted to a LLC in New Mexico

June 23, 2008 · Filed Under Business 
From: Shawn Gay

I suppose it isn’t rocket science, but converting a sole proprietorship to a LLC was a process I found to be more complicated than it should be. After having completed the transition successfully, I can now see that there was really more mystery than any true complexity to the situation. So, for the benefit of others who might be trying to go this route, here is what I did in a nutshell. As a caveat, I’m not a lawyer or an accountant. I consulted my accountant at various points along the way, and she was a great help, especially for the peace of mind of knowing you have an experienced professional guiding you. You should certainly consult your attorney or accountant if you have any questions about any steps in the process. Following are the basics steps I took.

The basic process of converting a sole proprietorship to a single-member LLC

There were essentially five steps involved in my case:

  1. Fill out Articles of Organization and submit via US Postal Service to the New Mexico Public Regulation Commission along with $50 filing fee. In order to complete this step, you have to search and make sure the name you are choosing is available. Note that the form linked to above is really two separate forms, the Articles of Organization and a statement of acceptance of appointment by the initial registered agent. There are only six Articles in the Articles of Organization, so it’s not complicated. However, you have to make some decisions, such as whether the duration of the organization is permanent or of limited duration, whether you will serve as the initial registered agent, and whether the management will be member-managed or manager-managed. It took less than two weeks for me to send the completed forms and check to the state of New Mexico and for them to send me an approval in the form of a Certificate of Organization.
  2. Get a new IRS employment identification number (EIN). This step may not be strictly necessary — it is still cloudy in my mind exactly when you must get a new EIN. But, it certainly allows for a clean distinction between the operation of your business as a sole proprietorship and an LLC. It was helpful to have the new number to proceed to the next steps as well. Note that you should wait until after your LLC Articles of Organization are approved by the state before attempting this step in case there is some glitch such as a name conflict. At this point, it is also a good idea to draft a formal Operating Agreement to give your LLC a well documented foundation. In New Mexico, the Operating Agreement does not have to be filed with the state, but it is still a good idea to have one to show other business entities if they ask. I used a template from this book.
  3. Get a new bank account for the LLC. Once you have your new EIN, you can proceed to get a bank account solely for the LLC funds. You can transfer all of your sole proprietorship funds to the LLC at that point, or a portion, whatever is appropriate for your situation.
  4. Get a new state Tax ID (CRS) number.You can theoretically register your business online, but I actually went down to the local office of the New Mexico Department of Taxation and Revenue. This was convenient because I could ask the representative to close my other CRS registration while I was there.
  5. Update your business registration with your local city or county government. After less than an hour at the NM Taxation and Revenue Department, I had my new CRS number and could proceed to the last step. For me, it was a quick trip to the Albuquerque Treasury Offices. I showed them my new number, and they updated my records while I waited.

Well, I hope that this quasi-checklist can be helpful to some folks trying to get their business going. I found some helpful websites along the way that were very useful to me:

Also, here are some books that I found quite helpful. Click on the images to take you to the books entry on Amazon.com



Wishing you all the best!

–Shawn

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Comments

One Response to “How I converted to a LLC in New Mexico”

  1. From: Debbie
    on June 23rd, 2008 5:23 pm

    I recently came upon a website that enables you to obtain online every city, county, and state business license all over the U.S.! Their website is http://www.businesslicenses.com or as they advertise Get Every Business License Online 800-679-3611 from a California Business License to a Florida Occupational License or a Washington state Business License and all other states in-between.
    Enjoy and Good luck!

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