The NM LLC (Limited Liability Company) is a tax flexible business structure, offered by the US state of New Mexico, that is both tax and cost efficient, especially when owned by non-US residents. In this article, I provide an overview and detail how registration, maintenance, taxation and banking works.
New Mexico is mostly desert, with a few mountainous and forested areas. It also is one of the least populated states in the Union. As is common in this part of the country, privacy and lax regulations are an important part of the culture and this is reflected in the NM LLC Act. For one, there are no requirements to ever file the ownership details with the registry, allowing the owners to keep their personal details off public records. There is also no need to obtain a business license if the LLC has no local operations, meaning that in the context of location independence the LLC registration itself is usually sufficient.
What is an LLC though? And how does it work?
An LLC, or Limited Liability Company, is a tax flexible business structure that offers full liability protection to its owners. Tax flexible, in this context, refers to an LLC’s ability to make a classification election with the IRS. It can, in other words, choose how it wants to be taxed. For example, it can elect to be treated as a disregarded entity (flow-through entity), a partnership, a corporation, a trust etc. This election is made when the LLC first applies for an EIN (at registration) but can be amended at any time, if needed.
When an LLC is owned by non-US residents, it will usually be most beneficial to elect to have the LLC treated as a disregarded entity (if it has one owner) or a partnership (if it has multiple owners). Both classifications allow for the flow-through of profits, meaning that the LLC itself is never liable to tax. The owners are instead responsible for reporting their own share of the profits, and paying any applicable tax, according to their own circumstances. This last part is key, because it means that if no work is performed while physically in the US (and thus no US sourced income generated), no income will have to be reported in the US by non-US resident LLC owners (and no US tax return filed).
In other words, an LLC owned entirely by non-US residents, with no physical operations in the US, that elects to be treated as a disregarded entity or a partnership, will not have to pay any US taxes in most cases (nor will its owners).
To register an LLC in New Mexico, you will first have to appoint an organizer. The role of the organizer is to file the certificate of organization with the Secretary of State (the registry). Once filed, the role of the organizer ends.
You can act as the organizer for your LLC but it is important to keep in mind that the details of the organizer will be visible on public records. As such, you have to hire a registration service if you want to keep your details private.
In any cases, you will have to hire a registration service in order to obtain a suitable mailing address in New Mexico (this is referred to as the registered address).
Once the SoS has approved the certificate of organization, your LLC will be deemed registered and you will be able to apply for an EIN with the IRS. This is done by filing form SS4 via either fax or postal mail (unless you have an SSN or ITIN, in which case you can apply online). It is on form SS4 that you will make your initial classification election.
Within a few weeks (actual processing times vary depending on workloads at the IRS), you will receive your EIN and will be able to open bank accounts, payment processing accounts etc. At this point, your registration is complete.
Unlike most other states, New Mexico does not require the filing of an annual report for LLCs. As with Florida and Wyoming, there are no requirements to file any financial information with the state, if there are no local operations. As long as you maintain your registered address, your LLC will remain active.
An LLC treated as a disregarded entity, owned by a non-US resident, with no physical operations in the US, will not usually be liable to US taxation nor will its owner be required to file a US tax return. In most cases, form 5472 will have to be filed, however, to report the transactions that occurred between the LLC and its owner (sales, business expenses etc are not usually reportable).
An LLC treated as a disregarded entity, owned by a non-US resident, with physical operations in the US, will be liable for US taxation on the profits from said physical operations and its owner will be required to file a US tax return (form 1040NR, in most cases). Form 5472 will also have to be filed.
An LLC treated as a partnership, owned by non-US residents, with no physical operations in the US, will not usually be liable to US taxation but will be required to file a partnership return in the US (form 1065, along with a number of additional schedules). Form 5472 does not have to be filed in this case.
An LLC treated as a partnership, owned by non-US residents, with physical operations in the US, will be liable for US taxation on the profits from said physical operations and its owners will be required to file individual US returns in addition to the LLC itself being required to file a US partnership return (form 1065, along with a number of additional schedules). Form 5472 does not have to be filed in this case.
It is important to keep in mind that while your LLC may not be liable to tax in the US, it may be liable to tax in other countries (your country of residency, most likely). To learn about how taxation works when it comes to foreign registered entities, such as US LLCs, read my guides on place of management rules and CFC rules. I also recommend that you read my explainer on foreign sourced income.
The US really shines when it comes to banking, there are a tremendous number of options and the quality of the products is unrivalled anywhere in the world.
An LLC owned by non-residents will be able to remotely open accounts with fintech services like Wise. It will also be able to remotely open “traditional” bank accounts with a number of banks including Mercury and Relayfi. If travel to the US is possible, it will be able to open accounts with the national banks (Chase, Citi, Bank of America, TD etc) and many regional banks and credit unions. For more details about US banking, read my Banking guide to the US.
An LLC owned by non-residents can also open accounts with payment services such as Stripe and PayPal. If you plan to rely on those services, it will be a good idea for the LLC owner(s) to apply for an ITIN as it will prevent the types of account closures you may have read about online. I have written a guide detailing how, you can read it here.
It is also fairly easy to apply for US credit cards, for both personal and business use. I have written a guide covering this, you can read it here.
Register a NM LLC with Freedom Surfer
Freedom Surfer’s business registration service is the most efficient way to start and run your online business, built entirely with location independence in mind. Our NM LLC registration package includes all government fees, a local mailing address (for use as the registered and mailing address) with mail scanning and forwarding, the EIN application, all necessary US filings (including form 5472 if applicable) and an Insiders Club membership (a discount is available if you are already a member). Click here to learn more and place your order.