How to Set Up an LLC as an S Corp in Albuquerque

If you’re starting a business in Albuquerque, you might be thinking about forming a Limited Liability Company (LLC). An LLC is great because it protects your personal assets—like your house or car—from business debts or lawsuits. But did you know you can also set up your LLC to be taxed like an S Corporation (S Corp)? This combo can save you money on taxes while keeping your business simple. Here’s how to do it, step by step.

Step 1: Form Your LLC in New Mexico

First, you need to create your LLC. In New Mexico, this is pretty easy:

• Pick a Name: Choose a unique name for your business. Make sure no one else is using it by checking with the New Mexico Secretary of State’s website.

• File Articles of Organization: This is a form you send to the state. You can file it online or by mail with the New Mexico Secretary of State. It costs $50, and you’ll need to include your business name, address, and a registered agent (someone who gets legal papers for your LLC).

• Get an EIN: After your LLC is approved, get an Employer Identification Number (EIN) from the IRS. It’s like a Social Security number for your business, and it’s free to get online.

• Get a BTIN: File a New Mexico Business Tax Identification Number application with the Taxation and Revenue Department. This is for paying state taxes. If you’ll have employees or sell goods, you may need extra permits—like a seller’s permit from the city of Albuquerque.

Once this is done, you officially have an LLC!

Step 2: Decide If S Corp Status Makes Sense

An LLC by itself is taxed as a “pass-through” business. That means profits go straight to you, and you pay taxes on them when you file your personal tax return. But if your LLC makes a decent amount of money, switching to S Corp status might lower your taxes. Why? Because with an S Corp, you can pay yourself a salary and only pay payroll taxes on that amount—not on all the profits. The rest of the money can come to you as a distribution, which skips some taxes.

For example, if your Albuquerque business earns $80,000, you could pay yourself a $40,000 salary and take the other $40,000 as a distribution. You’d only pay payroll taxes on the salary part. Talk to a tax pro to see if this works for you.

Step 3: File IRS Form 2553

To make your LLC an S Corp for tax purposes, you need to tell the IRS. Here’s how:

• Fill Out Form 2553: This is called the “Election by a Small Business Corporation” form. You can find it on the IRS website. It asks for your LLC’s name, EIN, and when you want S Corp status to start.

• Sign and Submit: Everyone who owns part of the LLC (called “members”) has to sign the form. Then, mail it to the IRS or file it online. There’s no fee, but you have to send it within 2 months and 15 days of starting your LLC—or by March 15 if you want it for the current tax year.

• Wait for Approval: The IRS will let you know if your election is accepted. Once it is, your LLC stays an LLC under New Mexico law, but the IRS treats it like an S Corp for taxes.

Step 4: Follow S Corp Rules

After you get S Corp status, there are a few rules to keep up with:

• Pay Yourself a Salary: If you work in the business, you need to pay yourself a “reasonable” salary (the IRS watches this, so don’t set it too low).

• File Extra Tax Forms: You’ll need to file Form 1120S each year for the business. Paying yourself a salary also includes regularly sending forms to the IRS and remitting payroll taxes. A payroll service can help you manage this important piece.

• Stay Eligible: S Corps can’t have more than 100 owners, and all owners must be U.S. citizens or residents. With few exceptions, they must also be natural persons. Your LLC also can only have one “class” of stock (basically, everyone gets the same type of ownership).

Why This Matters in Albuquerque

Setting up an LLC as an S Corp can be a smart move for small business owners here. Whether you’re running a taco truck near Old Town or a tech startup in the Innovation District, this setup can help you keep more of your hard-earned cash. Plus, New Mexico’s filing process is quick and affordable, so you can get started without breaking the bank.

Final Tip

This process is doable, but it’s smart to team up with a New Mexico lawyer and accountant. They can double-check your paperwork and make sure you’re saving as much as possible on taxes. Ready to get started? Your business could be up and running—and taxed smartly—in no time!

References

1. New Mexico Secretary of State, “Business Name Search,” https://www.sos.nm.gov/.

2. New Mexico Secretary of State, “Limited Liability Company (LLC) Filing Information,” https://www.sos.nm.gov/business-services/. Fee confirmed as of March 2025.

3. Internal Revenue Service, “Apply for an Employer Identification Number (EIN) Online,” https://www.irs.gov/.

4. Internal Revenue Service, “LLC Filing as a Corporation or Partnership,” https://www.irs.gov/businesses/small-businesses-self-employed/.

5. Internal Revenue Service, “S Corporations,” https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations.

6. Internal Revenue Service, “Form 2553: Election by a Small Business Corporation,” https://www.irs.gov/forms-pubs/.

7. Internal Revenue Service, “Instructions for Form 2553,” https://www.irs.gov/pub/irs-pdf/i2553.pdf.

8. Internal Revenue Service, “S Corporation Employees, Shareholders and Corporate Officers,” https://www.irs.gov/.

9. Internal Revenue Service, “Form 1120S: U.S. Income Tax Return for an S Corporation,” https://www.irs.gov/forms-pubs/.

10. Internal Revenue Service, “S Corporation Eligibility,” https://www.irs.gov/businesses/.

11. New Mexico Taxation and Revenue Department, Business Registration. Available at: https://www.tax.newmexico.gov/businesses/