1. Single Member LLC

New Mexico Single Member LLCs

Table Of Contents

  1. Single Member LLC
  2. Single Member LLC Operating Agreement
  3. Limited Liability Company Taxes
  4. Are SMLLCs Popular?
  5. Is There Anything to Keep in Mind?

A limited liability company with one owner is referred to as a Single Member LLC. This is because an LLC's owner is a member and thus a single member LLC has only one owner. Many small businesses we help create are single-owner companies. Subsidiaries of a holding company are single-member LLCs, too, as they have one owner - the holding company.

Regardless of what brings you to New Mexico, rest assured the New Mexico Secretary of State allows the filing of single-member LLCs. Learn more here about the advantages of a New Mexico LLC and how to form an LLC in New Mexico.

Single Member LLC Operating Agreement

Operating agreements function as a contract binding the owners, or members, of a limited liability company together. Given that single-member companies only have one owner, it can seem silly to ratify an operating agreement. Banks still often require them, however, and they can be useful for demonstrating ownership. They are also important in cases where you will have a manager. For example, if you will be purchasing real estate and will have a manager open the bank account and operate the property. In this case, an operating agreement carefully delineates what the manager can and cannot do. Learn more here about New Mexico LLC operating agreements.

Limited Liability Company Taxes

The IRS will treat an LLC with one member as a disregarded entity. This is a form of pass-through taxation and avoids the dreaded double taxation of a Corporation. If you desire, you may file to be taxed as an s-corp, c-corp, or partnership in addition to being a disregarded entity. Which of these classifications is the best for you should be determined by you and your accountant. This information will not be submitted to New Mexico's Secretary or even when you apply for your EIN. You should inform the Internal Revenue Service of the change in classification within 75 days of obtaining the EIN, e.g. via form 2553.

Are SMLLCs Popular?

While they have a bad reputation, they are among the most popular formations. This is because not everyone has a partner they want to bring on. Many small businesses are run as a sole proprietorship, or by someone who is happy tending things to themselves. Such a setup may seem simpler, but is not usually a good fit and one should form a single-member limited liability company instead. Often New Mexico LLCs' tax benefits will pay for the cost of formation. An SM-LLC is formed by default when creating a holding company and subsidiaries. Many of our clients are real estate investors or e-commerce retailers. In each of these industries, a holding company with subsidiaries is a useful tool for asset protection.

Is There Anything to Keep in Mind?

The largest point to keep in mind is that having just one owner is not an excuse to disregard corporate formalities. It is still important to obtain an employer identification number, open a bank account, maintain separate books, properly title assets, and hold annual meetings. These small steps ultimately breathe life into the company and are important for enjoying an LLC's benefits.

The ordering and formation processes are largely the same. We will draft a different operating agreement depending on whether there are single or multiple members. Beyond this, the start-up and annual fees remain the same.

The New Mexico Secretary of State requires we mark whether there is one or multiple members on the Articles of Organization. We do not have to disclose who the owners are, just whether there is one or more than one. If you have any questions, you may follow this link to learn about forming an LLC in New Mexico.