When starting your business, you must decide which legal structure to use. Partnerships are popular choices when going into business with other people. There are numerous types of partnerships to choose from. New Mexico offers four types of partnerships. Each type of partnership comes with different legal advantages.
A limited liability partnership (LLP) is a type of business partnership. An LLP is a type of business structure. LLP’s are set up in the same way as a general partnership. LLPs consist of two or more owners, known as partners, that share in the company’s profits and management. Unlike a general partnership, an LLP offers limited liability.
Many owners choose this kind of business structure for the limited liability because all partners are personally protected from liabilities that the company may incur. The partners’ private wealth attached to the company cannot be harmed even if the company gets into trouble.
What Are the Different Types of Partnerships?
General Partnership (GP)
General partnerships offer partners the possibility of sharing revenue and control. General partnerships require very little legal paperwork compared to other types of partnerships. However, general partnerships make the partners fully liable for debts incurred by the partnership.
New Mexico considers general partnerships as pass-through entities. New Mexico mandates that general partners account for the profits, losses, and expenses of the GP on their individual income tax returns.
Limited Partnership (LP)
Limited partnerships are similar to partnerships, except there are two types of partners. General partners commonly control the day-to-day operations of the partnership. Limited partners typically act as silent partners.
General partners in LPs have the same liability as GP general partners. Still, limited partners in LPs are only liable for the partnership’s debts up to their investment in the business, as to make investing in the partnership more appealing to limited partners.
Limited partnerships have the same tax structure as GPs. The partners account for the taxes on their tax returns as pass-through entities.
Limited Liability Partnership (LLP)
Limited liability partnerships are similar to limited partnerships. However, LLPs offer general partners protection from liability they didn’t cause. If one general partner is involved in a lawsuit that doesn’t involve any other partners, the other general partners are protected from any debts resulting from that lawsuit.
LLPs are one of the more complex types of partnerships. LLPs are pass-through entities. Partners are responsible for the profits and losses on their taxes. Limited liability partnerships are popular among professionals who take on a high risk of liability, such as lawyers, doctors, and surgeons.
LLPs in New Mexico must file a yearly report.
Limited Liability Limited Partnership (LLLP)
Limited liability limited partnerships are highly regulated but offer the benefits of both LLPs and LPs. General partners’ liability is limited. Limited partners’ liability is capped by their investment in the partnership. All partners are protected from the other partners’ individual debts, similar to LLPs.
LLLPs are a relatively new form of business in New Mexico. LLLPs are quickly gaining in popularity because of their liability benefits. They are taxed in similar ways as all other partnerships.
New Mexico LLLPs must file a yearly report.
What Are the Requirements for an LLP?
A company can only be an LLP in New Mexico if it meets specific requirements set forth by the New Mexico Secretary of State and the New Mexico Uniform Partnership Act. An LLP must have at least two partners. An LLP must have either an office in New Mexico or a registered agent for service of process which is willing to receive official documents on behalf of the company.
The agent can be either a New Mexico resident or a business entity registered to do business in the state. Any company seeking to become an LLP must file the correct paperwork with the New Mexico Secretary of State, obtain liability insurance, and select a name that ends with “RLLP,” “LLP,” “R.L.L.P.,” “L.L.P.,” “Registered Limited Liability Partnership,” or “Limited Liability Partnership.”
What Paperwork Do I Need to Form an LLP?
A company cannot become an LLP in New Mexico until it files paperwork with the Partnership Unit of the Office of the New Mexico Secretary of State. This paperwork must be filed in the mail. To make the process easier, the Office of the New Mexico Secretary of State provides standard forms for the necessary paperwork.
If the company is registering as an LLP for the first time in New Mexico, it is a domestic LLP and will need to file a Statement of Qualification for New Mexico Limited Liability Partnerships. If the company has already been registered in another state as an LLP, it must file a Statement of Qualification for Foreign Limited Liability Partnership because it is a foreign LLP.
Both forms will require you to provide the following information:
- The name of the LLP
- The street address of the LLP’s chief executive office
- Either the street address for any office that the LLP may have in New Mexico or the name and address for the LLP’s registered agent
If you do not want the paperwork to become effective right away, you can include a date on which the paperwork will become effective. You will also need to indicate on the form that you intend for your company to be an LLP and have two of the LLP’s partners sign the form.
How Do I Select a Business Name?
Select a unique business name that you like. Your business name should appeal to your potential clients. Business names are the beginning of all future business endeavors. You must include your choice of entity in the business’s name.
This means that “ABC Computer Repair” would be called “ABC Computer Repair, LP” if it’s a limited partnership.
How Do I Register My Business Name? How Can I Get My CRS Tax Number?
You can register your business name with the New Mexico Secretary of State. Visit the New Mexico Tax & Revenue site to get your CRS tax number. CRS tax numbers are used to report your business earnings. CRS tax numbers are not the same as a tax return.
What Benefits Does New Mexico Give to an LLP?
The state of New Mexico is committed to helping companies expand. New Mexico offers programs to help companies start up and grow. One such program is Collateral Support Participation Program. The Collateral Support Program offers funds to New Mexico-based for-profit companies that need capital to grow.
What Are the Disadvantages of a New Mexico Give LLP?
Any LLP registered in New Mexico must file an annual report during the first three months of every year. Failing to file an annual report may result in the company losing its status as an LLP. The Secretary of State may choose to revoke the delinquent company’s Statement of Qualification.
Where Can I Find the Right Lawyer?
Creating a company with limited liability is not easy. There are many legal requirements to which your company must adhere. If you are going to form an LLP in New Mexico, you should speak with a New Mexico corporate lawyer. A New Mexico business lawyer can help you fill out the necessary paperwork and explain the laws that apply to your company.