The New Mexico Asset Protection LLC
The New Mexico Asset Protection LLC is a powerful asset protection and privacy tool. When properly established and implemented, it can allow individuals to own property privately while benefiting from limited liability.
LLC is an abbreviation for “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, Capitalism, and society in general. It allows for the pooling of capital required for large scale investments and business endeavors.
When used for owning assets, the New Mexico LLC gives you the following benefits:
no annual LLC reports to file with the State of New Mexico
no annual fees to the State
choice of tax classification
Let’s examine these in detail:
An individual, or group of individuals, can own property assets in the name of the LLC without revealing their individual names publicly. Contrary to most other States, New Mexico does not require the names of the beneficial owners (members) of the LLC to be listed on the Articles of Organization when the company is formed.
This is great for owning real estate because your individual name will not show on the paperwork and a search of the public records 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. The only ongoing fee in New Mexico is a small annual fee to maintain a Registered Agent in the State.
With the LLC you can choose how you wish to be treated for tax purposes. Your options are:
Single Member – Disregarded Entity
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). LLC’s can also be owned by other entities like a tax-exempt church.
“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 “informational return” known as Form 1065. This “informational return” 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 small investment required to properly set up a New Mexico LLC makes it an affordable and essential tool for privacy seekers, entrepreneurs and real estate investors.
How to properly establish an Invisible LLC
When organizing your Invisible LLC it is imperative that you use an incorporator that keeps your name off of the organizational documents. Those low-cost, online incorporators will not suffice. We have an established relationship with a privacy-friendly incorporator and you can order through us below.
Real Estate Ownership Strategies
These unique features make the New Mexico LLC a popular choice for holding real estate. Most people can use the New Mexico LLC without having to register it 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.
Many real estate investors will set up a separate LLC’s for each investment property.
Here is a quick and simply way to protect the equity in a piece of real estate with a New Mexico LLC:
You can 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.