If you currently have a corporation in New Mexico and want to convert it to an LLC, you must ensure you understand the basic process for converting a business entity within New Mexico. You should also expect complicated tax consequences when you change your corp to become an LLC. As such, you should always consult with a tax adviser prior to making the change.
To further complicate the process of converting from a corp to LLC in New Mexico, there are numerous variations. You can have one of several types of corporations or one of several LLC tax statuses. There are even multiple types of conversion. Some distinctions to consider include:
There are also multiple ways to convert a business, including non-statutory or statutory conversion and statutory mergers.
It is not realistic to explore every combination. For simplicity, the following information focuses on for-profit corporations in New Mexico that are closely held and want to convert to a multi-member LLC.
New Mexico offers a simplified process for converting your business via several documents. The PRC (Public Regulation Commission) receives these documents from you. This process allows for “statutory conversion” and will automatically transfer all liabilities and assets to the LLC. There is no need to form a separate LLC before beginning; the process only involves a single business entity. You can view the specific code in the New Mexico Statutes Annotated Sections 53-19-59 to 53-19-63.
To begin the process of converting a New Mexico corp to an LLC, you must provide the conversion agreement. You must also receive approval of this conversion’s conditions and terms from shareholders. Finally, you must file your statement related to the organization articles and conversion with the Public Regulation Commission.
The previously mentioned conversion agreement must outline the conditions and terms for the conversion related to the shareholders’ stocks and how they will become either cash or membership in the LLC. The default is that the conversion’s conditions and terms must follow those of your governing document, such as the organization articles. In the case where you do not have these guidelines in a document, all shareholders must consent.
You will not find a form to fill out for the conversion statement. You must create your own draft. Within your conversion statement, you must include the following information:
There are also specific requirements regarding the new LLC’s organization articles. These must feature:
There is a blank form available from PRC for this purpose.
You will also have to pay a filing fee of $150. This includes your articles of organization in addition to the conversion statement.
In addition to the above legal steps, you must also ensure you complete the tasks any new LLC must complete. These include things like notifying clients and suppliers of the new status, holding any required meetings, keeping minutes of those meetings, using the name properly, and separating LLC finances.
Be sure to go over the tax implications of your conversion from corp to LLC with a lawyer or tax adviser as well.