The New Mexico LLC, properly organized, is one of the most powerful asset protection and privacy tools ever created. When properly established and implemented, it allows an individual - or group of individuals - to participate in a business endeavor or own property privately while benefiting from limited liability.
In law the LLC is literally a "limited liability company". It is treated as a separate legal entity - separate from its individual owner(s). This means that the individual owner(s) cannot be held liable for the debts of the LLC itself (and vice versa). The risk of the owner(s) is limited to the amount of their investment in the LLC and no more (instances of negligence on behalf of managers are excluded). This is a boon for entrepreneurs, real estate investors and Capitalism in general. It allows for the pooling of capital required for large scale investments and business endeavors.
When set up properly the Invisible New Mexico LLC gives you the following benefits:
Let's examine these in detail:
An individual, or group of individuals, can own assets in the name of the LLC without (in most cases) revealing their individual names. This is especially true of real estate ownership. The State of New Mexico does not require the names of the beneficial owners (members) of the LLC when the company is formed. It is important that you use an incorporator that provides this service when setting up your LLC (see below).
Most States require the names of the individual owners and/or the names of the Managers when a company is formed. New Mexico requires neither.
This is great for owning real estate because your individual name will not show on the paperwork and a search of the New Mexico website will only show the name of the LLC.
Important Note: Bankers and other financial institutions will need to know the names of the officers and beneficial owners when opening an account.
No Annual Reports or Annual Fees
Most States like California require an Annual Report to be filed with the State which discloses personal and private information about the owners. Anyone can search the California Corporations website and find this sensitive information about the owners and managers of any company registered in their State. California also charges a minimum, annual franchise tax of $800. New Mexico has neither. The only ongoing cost for a New Mexico LLC is the $100 annual fee to maintain a Registered Agent in the State of New Mexico (the recommended incorporator below provides this service).
With an Invisible New Mexico LLC you can choose how you wish to be treated for tax purposes. Your options are:
The most preferred choice is "Single Member - Disregarded Entity". Profits and Losses are reported on the individual members' tax return and the LLC itself is not required to file. This saves time and money. To qualify for this option the LLC must be owned by no more that a single member (husband and wife are considered one).
"Partnership Status" is chosen when there are two or more members (owners) who are not husband and wife. The profits and losses are still reported on the individual owners' tax returns but the LLC must file an "information return" also know at the federal level as Form 1065. This "informational return" simply states the profits or losses and to whom they were attributed to.
Your tax status election is made when you apply for your Federal Tax Identification Number (often referred to as "EIN" or "TIN"). This can be done at the IRS.gov website.
The investment required to properly set up an Invisible New Mexico LLC is around $500 which makes it an affordable and essential tool for entrepreneurs and real estate investors.
How to properly establish an Invisible New Mexico LLC
When organizing your Invisible New Mexico LLC it is imperative that you use an incorporator that leaves your name off of the organizational documents. Those cheap, online incorporators will not suffice.
We recommend that you order your Invisible New Mexico LLC from NM Corporate Services, LLC. You can order by contacting Sharon at firstname.lastname@example.org
These unique features make the Invisible New Mexico LLC a popular choice for internet entrepreneurs and real estate investors alike. Both of these can establish LLC's without having to register the LLC in their home state as a "Foreign LLC transacting business within the State". To qualify for an exclusion they simply have to meet the definition of "activities of a foreign limited liability company that do not constitute transacting intrastate business in this state". For California, you can find these exclusions in TITLE 2.6. CALIFORNIA REVISED UNIFORM LIMITED LIABILITY COMPANY ACT Section 17708.03 (b) and (c). Other States have similar exclusions. If you wish to avoid being classified as "transacting business within your state" make sure to use an "official business address" on your LLC organizational documents that is outside of your home State.
Most real estate investors will set up a separate Invisible New Mexico LLC for each investment property.
Here is a quick and simply way to protect the equity in a piece of real estate with an Invisible New Mexico LLC:
Simply have the current title "Owner of Record" grant an Option to Purchase to the LLC with a purchase price equal to the existing debt on the property. Record the Option Agreement. This effectively grants the LLC first claim to the equity (and ownership) in the property. Any subsequent creditors would have a junior lien. In the event the property owner was sued, the LLC could exercise its option and take title to the property - protecting the equity and transferring title out of the name of the current owner.