Starting a business in New Mexico can be an exciting venture, but taking a little time to research your idea is important. The first step is to choose a business idea that fits your interests, skills, and resources. Once you have identified a potential opportunity, it is important to conduct market research to determine if there is a demand for your product or service. You can do this by researching other local small businesses in the same industry and seeing what they have achieved.

To help with your research or to spark potential ideas, check out our library of business ideas to get detailed industry information, trends, costs to start, tips, and lots more.

Once you have researched and determined that there is a viable market for your product or service, the next step is to write a winning business plan. Having a well-researched business plan is essential for any entrepreneur starting a business, as it provides a clear roadmap for your venture and helps secure funding.

A business plan helps you clarify your objectives and strategies, allowing you to define your target market, value proposition, and competitive advantage. By outlining your goals and the steps needed to achieve them, you establish a sense of direction and focus for your business.

A business plan is also instrumental when seeking external funding, such as loans or investments. Lenders and investors need to understand your business model, financial projections, and growth potential before providing funding.

Related: How to write a business plan

The next step to starting a new business in New Mexico is selecting a business entity. A business entity is the legal structure under which a business operates. Choosing the right one is crucial because it determines the legal and financial responsibilities of the business owner(s) and the extent of personal liability for business debts and obligations.

In New Mexico, the four common types of business entities are sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).

Sole Proprietorship: This is the simplest business structure, where the owner is solely responsible for all aspects of the business. Pros include ease of formation as there is no formal paperwork or registration with the state, and the owner has complete control over the business operations. However, the owner also bears unlimited personal liability for the business’s debts and obligations, putting personal assets at risk.

General Partnership: This business entity involves two or more individuals who agree to share in the profits and losses of a business. Similar to a sole proprietorship, the formation process is relatively simple. Pros include shared decision-making and pooled resources. However, each partner has unlimited personal liability for the business’s debts and obligations, potentially exposing personal assets to risk.

Corporation: A corporation is a separate legal entity from its owners, providing limited liability protection. Pros include limited liability, easy transfer of ownership, and potential tax advantages. However, corporations face more complex regulations and reporting requirements and the possibility of double taxation.

Related: How to form a New Mexico corporation

Limited Liability Company (LLC): An LLC combines the benefits of a corporation’s limited liability with the flexibility and simplicity of a sole proprietorship or partnership. Pros include limited liability for owners, flexible management structure, and potential tax benefits as profits can be passed through to owners’ individual tax returns. However, New Mexico LLCs have more complex formation and annual report requirements than sole proprietorships and general partnerships, though they are easier than the corporation.

Related: How to form a New Mexico LLC

Business Licenses – The state of New Mexico doesn’t require a general New Mexico business license, however, many cities and units of local government may require a business registration or a license to operate.

Combined Reporting System Number – All businesses will need to register for a New Mexico Combined Reporting System Number from the New Mexico Taxation and Revenue Department. The business tax identification number is commonly used to report gross receipts tax (which is similar to sales tax).

Employer Identification Number (EIN): An EIN is a federal tax identification number assigned by the Internal Revenue Service. This number is used to identify your business for tax purposes and is required if you have employees, operate a corporation, partnership, multi-member LLC, or have certain tax-related obligations. You can apply for an EIN for free online through the IRS website.

Local Business Licenses and Permits: Depending on your business location and operations, you may also need to obtain local licenses and permits. Check with your city or county government offices for information on local requirements, such as zoning permits, health department permits, or occupational licenses.

State Professional Licensing – If you are operating in a regulated profession, such as an accountant, barber, handyman, interior designer, and others, licensing is required in New Mexico. While this isn’t a license on the business, licensing is required in order to operate. The New Mexico Regulation & Licensing Department (RLD) oversees many of the regulatory boards for licensed professionals.

Related: What business licenses and permits are required in New Mexico?

Keeping your finances in separate personal and business bank accounts is critical for maintaining legal protection (corporations and LLCs), making tax compliance easier, and managing your finances effectively, Every bank is different, but in general, to open a business bank account, they will request:

Sole proprietorship & partnership: Trade Name Certificate, EIN or SSN, and owner(s) driver’s license
Corporation: New Mexico Articles of Incorporation, bylaws, Certificate of Good Standing, EIN, and owner(s) driver’s license
LLC: New Mexico Articles of Organization, Operating Agreement, Certificate of Good Standing, EIN, and owner(s) driver’s license

There are several funding options available for a small business, with personal funds, conventional bank loans, SBA loan guarantees, microloan programs, and investors being the primary sources. No matter which option you choose, it’s important to do your research before making any decisions about how you will finance your business venture in New Mexico.

Conventional Bank Loans: Traditional banks and credit unions offer a range of business loans, such as term loans, lines of credit, and commercial real estate loans. To qualify, you’ll need a solid business plan, good credit history, collateral, and personal investment of typically between 15% ad 25%. Banks typically offer competitive interest rates but may have more stringent lending requirements compared to alternative financing options.

SBA Loan Guarantees: The Small Business Administration (SBA) offers loan guarantee programs, such as the 7(a) loan and 504 loan programs, to help small businesses secure financing from participating lenders. These loan guarantees reduce the risk for lenders, making it easier for small businesses to obtain loans with favorable terms and interest rates. Eligibility requirements for SBA loans include being a for-profit business, meeting the SBA’s size standards, and demonstrating an ability to repay the loan.

Microloan Programs: Microloans are small, short-term loans designed for small businesses and startups that may not qualify for traditional bank loans. In New Mexico, organizations such as Accion, The Loan Fund, and WESST offer microloans ranging from $1,000 to $50,000. These programs also often provide technical assistance and business support services to help entrepreneurs succeed.

Investors: Equity financing involves raising capital by selling ownership shares in your business to investors. This can include angel investors, venture capitalists, or even friends and family. In exchange for their investment, these shareholders receive an ownership stake in your business and may require a say in decision-making. While this method can provide significant funding without the burden of debt, it also means sharing future profits and potentially relinquishing some control over your business.

Related: Understanding the different types of business funding

When hiring their first employee, business owners have a lot of responsibilities to consider. Before they can hire someone, they must first evaluate which positions need to be filled and decide on a recruiting strategy. It’s important to create a job description that is clear and concise, and outlines the roles and responsibilities of the position. Business owners should also consider their company culture when looking for potential candidates. They should get in front of as many qualified candidates as possible through job postings, referrals, job fairs, etc., in order to find the right person for the job. Once they’ve narrowed down their list of applicants, employers should conduct interviews and background checks before making an offer.

After an offer has been made and accepted, employers must obtain an Employer Identification Number (EIN) from the IRS, register with state or local tax agencies if necessary, and decide whether they want to hire independent contractors or full-time employees. They must also ensure that all new hires are eligible to work in the U.S., and report them to the appropriate government agency within 20 days of their start date. Additionally, employers must withhold income taxes from employee wages, pay unemployment insurance taxes on wages paid to employees, pay payroll withholding taxes including Social Security and Medicare taxes on wages paid to employees, and provide any other benefits required by law such as health insurance or vacation time.

Related: Steps to hiring your first employee in New Mexico

Getting business insurance is an often overlooked step, but can protect you from financial losses due to accidents, natural disasters, or lawsuits. Understanding the different types of insurance policies available and how they can benefit your business is important. A few of the most common types of insurance include:

When starting a small business in New Mexico, it is important to consider purchasing general liability insurance. This type of policy covers any bodily injury or property damage caused by your company’s products or services. It also provides protection against libel and slander claims.

Business owners should also consider purchasing a Business Owner’s Policy (BOP). A BOP combines general liability coverage with property insurance and other coverages into one policy. This type of policy is ideal for businesses with physical assets such as buildings, equipment, and inventory.

Professional liability insurance (also known as Errors & Omissions Insurance) is another important type of policy for small businesses. This type of coverage protects against claims related to professional negligence or mistakes made by employees while providing services to customers. Professional liability insurance can help protect your business from costly legal fees and settlements associated with these types of claims.

Finally, it is important to consider purchasing commercial auto insurance if you use vehicles for your business operations. Commercial auto policies provide coverage for physical damage to vehicles used by the business as well as liability protection for any injuries or property damage caused by an accident involving one of these vehicles.

Related: Types of insurance your business may need

Bookkeeping is an essential part of running a small business. It helps you keep track of your finances, understand how your business is doing, and make informed decisions about the future. Bookkeeping involves maintaining records of all financial transactions, including sales receipts, accounts payable and receivable, payroll information, taxes, and other important financial documents.

To organize and record your financial information, consider the following methods:

Paper Filing System: Establish a well-organized paper filing system for physical documents, such as sales receipts, invoices, and tax records. Keep these files in a secure location and maintain a consistent filing method.

Accounting Software: Utilize accounting software, such as QuickBooks, Xero, or FreshBooks, to automate keeping records, generate financial reports, and facilitate tax compliance.

Outsourcing: If managing your bookkeeping becomes overwhelming, time-consuming, or you just want to spend your time elsewhere, consider outsourcing the process to a professional bookkeeper or accounting firm. They can help you maintain accurate records, save time, and ensure compliance with tax regulations.

Related: Setting up accounting for a business