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Advantages of Incorporating a Business in New Mexico
The “land of enchantment”, New Mexico is considered to have one of the best pro-business environments in the country. Although there are several reasons why you should register a new company in New Mexico the top most is the tax structure created to support manufacturers. According to a report by Ernst & Young, New Mexico has the lowest effective corporate income tax rate for manufacturing. There has also been a 22% reduction in corporate tax across all industries. Some of the other supporting factors for small businesses include:
- Zero inventory tax
- Competitive Incentives
- One of the lowest property tax in the nation
- Low energy costs
- Affordable real estate
Advantages of setting up an LLC Or Corporation
If you are thinking of a startup company in New Mexico then the good news is that the State of New Mexico and its communities are offering existing and future employers or businesses aggressive incentives as this will facilitate job creation as well as investment. The incentives vary from one industry to another with top industries being Advanced Manufacturing, Emerging Technologies, Logistics, Transportation & Distribution, Energy & Natural Resources, and IT & Data Centers. Of course, there are salient advantages on the type of business you form whether it is an LLC or a Corporation in New Mexico.
Advantage#1: Salient benefits of Corporation or LLC formation
Corporation
- Incentives according to industry: Whether you form a C Corporation or an S Corporation, there are several benefits available based on the type of industry you choose e.g., you can leverage the following incentive programs in the Advanced Manufacturing industry:
– Trade Support Company in a Border Zone
– Angel Investment Credit
– High Wage Jobs Tax Credit
– Consumables Gross Receipts Tax Deduction for Manufacturers
– Investment Tax Credit for Manufacturers
– Single Sales Factor
– Rural Jobs Tax Credit
– Texas/New Mexico Border Residents’ Tax Exemption - Independent Life: If you register a new business in New Mexico as an S Corporation then the most important advantage is that it will enjoy an independent life. The business entity will continue operation undisturbed even if it faced the death of one of its stockholders.
- Pass through taxation: If you register a new company in New Mexico as an S corporation then the corporation or firm will not pay any income tax. Instead, the income or loss of the corporation will be passed on to the stockholders.
LLC
- Flexibility of taxation: When you register a new business in New Mexico as an LLC, the choice of taxation can vary from that of a sole proprietorship, partnership, C Corporation or S corporation and this provides great flexibility.
- Incentives according to industry: If you are planning to form a limited liability company, there are several benefits and incentive programs that you can benefit from. These are available based on the type of industry you choose e.g., you can leverage the following incentive programs in the “Value Added Agriculture” industry:
– Rural Jobs Tax Credit
– Consumables Gross Receipts Tax Deduction for Manufacturers
– Beer & Wine Producers’ Preferential Tax Rate
– Investment Tax Credit for Manufacturers
– Opportunity Zone tax credits and other incentives
– Texas/New Mexico Border Residents’ Tax Exemption
– Single Sales Factor - Limited Liability: The owner of a New Mexico LLC will be able to enjoy limited liability protection, which means creditors can sue the LLC but not the owner or investors.
Advantage#2: Business Incentives
There are several factors that are responsible for creating a pro-business climate and the foremost among them are the various incentives and financing programs. A start-up company in New Mexico has to qualify for the incentive programs. Most of these programs are state governed although some are Federal incentive programs. Let’s take a look at a few of such incentive programs:
- High-Wage Jobs Tax Credit: This is a tax credit program that you can qualify for after you register a new company in New Mexico. You can get credit on 10 percent of the wages. The ceiling for this tax credit is $12,000.
- Manufacturers Investment Tax Credit: This is a tax credit aimed at businesses in the manufacturing industry or sector. Your business can get a maximum tax credit of 5.125 percent of the value of machinery or equipment purchased as well as any other property that is being used in business operation. This credit can also be applied against gross receipts, compensating, or withholding tax of up to 85% of the total.
- Rural Jobs Tax Credit: You can apply for this tax credit only after you register a new business in New Mexico. This credit is applied on taxes that are due on (state) gross receipts, personal income tax, or corporate income tax. It is also important to ensure your business is situated in Tier 1 or Tier 2 rural areas. This tax credit can be carried forward for a period of 3 years. Tax Credit Application
Are there any Disadvantages of Incorporating in New Mexico?
If you register a new company in New Mexico, whether domestic or foreign, the business will enjoy benefits that aid in the overall growth process. There are but a few disadvantages although they will not have any negative impact on your business in the long run. The process of incorporation takes more time and is monitored by federal, state as well as local agencies leading to paperwork that is compliant with the regulations. As for an LLC, it can be quite difficult to raise financial capital although that problem is solved by the state based grants and loan programs.