Do I need an operating agreement for my LLC in New Mexico?

June 29, 2025

By Nadia Cabrera-Mazzeo, Esq.

Short Answer: Technically no, practically yes.

What is an LLC operating agreement?

An operating agreement is one of the main governing documents for an LLC that lays out how the owners want the business to work. The operating agreement should cover things like:

     Who owns the business and what percentage of the business does each person own;
     What happens if an owner passes away or wants to leave;
     How to add new owners;
     How profits should be used and/or paid out to owners;
     Liability protection for owners and employees; and more.

The operating agreement is a legally binding contract that all of the owners sign and agree to. Owners should refer to this document, keep it up to date, and actually do what it says to do.

Is an operating agreement legally required for LLCs in New Mexico?

Technically no, New Mexico does not require LLCs to have operating agreements. However, LLC are extremely encouraged to have one in order to keep their business in good legal health, which means the business is legally compliant and has a strong liability shield.

Also, many banks require an operating agreement to open a bank account for an LLC.

An operating agreement goes a long way toward keeping a strong liability shield

One of the main purposes of forming an LLC is to shield owners from being personally responsible for the debts of the business. The “corporate shield” or “corporate veil” is not foolproof; it has to be kept strong through proper practices that show the business is operating for a valid business purpose.

An operating agreement usually has language that reinforces its intended liability protection and sets out rules for the company’s structure and operations. Without established rules and guidance
on how to operate the business, things can get slippery. For example, an owner of a single- member LLC may end up treating the company as an extension of themselves with no regard for the LLC’s legal independence. This is a recipe for corporate veil piercing by creditors who want to dip into the owner’s personal pocket to satisfy the LLC’s debts.

An operating agreement makes good business sense

Respecting an LLC’s legal independence to maintain a strong liability shield involves empowering the business with the tools it needs to walk on its own two feet. In a multi-member LLC, the first step toward that end is for the owners to agree on how they are going to work together for the business.

It’s essential to set clear expectations for ownership, management, and other authority over the business. Without guidance on these matters, an LLC could find itself being stretched every which way by owners who have different ideas about how to do things. By contrast, an LLC with a clear ownership and management structure has a better chance of staying the course even as individual owners and managers come and go.

Law office of Nadia Cabrera-Mazzeo, Esq.

Based in Taos, serving clients throughout New Mexico

505 427 2025

nadia@honestcontracts.com

The information on this website is not legal advice and does not create an attorney-client relationship. The rates and fees listed on this website may not be the most up to date.