New Mexico Sole Proprietorship

How to Become a New Mexico Sole Proprietor

In New Mexico, becoming a sole proprietor doesn’t require any formal setup or fees. You just start working. But even though it’s simple to begin, there are some extra steps you might want to consider along the way. Though not necessary, many sole proprietors find them helpful.

DBA Acquisition

A New Mexico doing business as (DBA) name is a crucial part of many sole proprietorships, as it enables you to use an assumed name for your business, rather than your own personal name. The advantages of acquiring a DBA start with image ― most customers feel that an assumed name is more professional and trustworthy than doing business with a company that uses its owner’s personal name instead.

That said, sole proprietors can sign up for a business bank account using their DBA name, which is another step that goes a long way toward making customers feel more comfortable doing business with you.

Unlike most other states, New Mexico currently does not require sole proprietorships to register their DBAs with the state. There is no registration process or requirements on either a state or local level.

Determine Taxation Requirements

Sole proprietors without employees usually don’t need to acquire a federal tax ID number (EIN), because as a one-person business, you can typically just use your own social security number for most things an EIN is used for. Still, if you would rather not use your SSN for privacy purposes, it would be a good idea to get an EIN regardless.

Beyond that, the nature of your business will determine which taxes apply to you as a sole proprietor.

Which taxes your business pays will largely depend on the goods or services it offers. To review all New Mexico taxes (and determine which you may owe) check out the comprehensive list compiled by the Tax & Revenue Department.

Additional information, all necessary forms, and full instructions on filing may be found on the Business Taxpayers’ page of the New Mexico Taxation & Revenue Department.

Obtain Business Licenses and Permits

There isn’t a requirement in New Mexico for sole proprietors to acquire a general business license, but depending on the nature of your business you may need other licenses and/or permits to operate in a compliant fashion.

Many licenses are industry-specific and determined by which goods or services your sole proprietorship offers. For example, businesses dealing with food will need to acquire health permits and those selling alcohol or tobacco will require tobacco permits.

For help determining which licenses are necessary for your business, the New Mexico Regulation and Licensing Department has compiled a list of agencies that dictate licensing requirements as resources for defining your sole proprietorship’s licensing requirements.

In addition, you should check to see if your business needs any licenses or permits on the local level.

In fact, most necessary licensing in the state happens at the local level. To ensure that your sole proprietorship meets all licensing and permit requirements for its municipality, you’ll want to consult the local government. A full list of counties and their contact information can be found here for this purpose.

What Is a New Mexico Sole Proprietor?

As opposed to a corporation or New Mexico limited liability company (LLC), the sole proprietorship is not a legal business entity. The sole proprietorship is a one-person business that is not considered to be a distinct entity from the person who owns it, and it is frequently operated using the owner’s personal name.

Here are the three main things you need to know:

Tax Responsibilities

Because there’s no distinction between the owner and the business itself, sole proprietors don’t need to file business tax returns ― they instead simply claim any business profits or losses on their personal tax returns.

Contracts

Sole proprietors are allowed to sign contracts using their personal name, and along those same lines, customers can write checks to the business by using the sole proprietor’s name.

More Flexible

The other big difference between sole proprietorships and more formal business structures is the fact that sole proprietors are allowed to commingle business and personal assets as much as they want to. With LLCs and corporations, ownership is required to keep their assets separate from those of the company. The downside of this aspect for sole proprietors is that if your business is sued, creditors are free to pursue your personal assets like your house, car, personal bank accounts, etc. For corporations and LLCs, creditors are limited to your business assets.