Mexico is One of the Most Feasible Nations to Form a Company in the Americas
Mexico is the 2nd largest economy in America, thanks to its strategic geographical position. It is situated between the United States and Central America, making it the bridge of operations between the two powerhouses. Forming a company in Mexico is feasible due to its recent commercial success which is deemed to be long-term.
A variety of factors have shaped Mexico’s economy, including 12 free trade agreements with 45 countries, a large, skilled labor market, and government policies that encourage foreign participation. These determinants have attracted an influx of foreign investment over the past decade and even today.
The government strongly advocates globalization, so foreigners who are forming a company in Mexico find the process straightforward.
Benefits of Forming a Company in Mexico
When starting up a business in Mexico, you can gain the following advantages, regardless of how small or big the company is:
- 100% Foreign Ownership
- No Capital Controls for Repatriation of Profits
- Foreigners can establish a Limited Liability Company
- Strong Property Rights and Protection
- No established Initial Capital Requirements
Steps on Forming a Company in Mexico
These are the steps you need to follow in order to legally start running a business in Mexico.
Choose the type of company that suits your business needs
Depending on your interests and resources, you may have to pick among these categories:
Limited Liability Stock Corporation (Sociedad Annima, S.A.)
There are two options in forming a Sociedad Annima: fixed and variable capital. As stated by law, a Limited Liability Stock Corporation requires a fixed capital of $50,000.00 to set up. For variable capital, you can establish an S.A. de C.V. (capital variable) with both fixed and variable shares of capital. However, the total should not be less than $50,000.00.
Limited Liability Company (Sociedad de Responsabilidad Limitada, S.R.L.)
Similar to a closed corporation in the United States, a Limited Liability Company requires a minimum capital of $3,000.00. In addition, the company can only have a maximum of 50 partners.
Civil Enterprise (Sociedad Civil, S.C.)
Professionals like lawyers and accountants utilize this company structure because it has no minimum capital requirements. Also, a Civil Enterprise doesn’t have a limit on its number of partners, but each individual remains jointly and personally accountable for any debt incurred.
Foreign companies may open a branch in Mexico with the approval of the National Commission of Foreign Investment (Comision Nacional de Inversiones Extranjeras, CNIE) and the Secretariat of Foreign Affairs (Secretaria de Relaciones Exteriores, SRE). You must also register it with the Public Registry of Commerce (Registro Publico de Comercio).
Different from a sucursal, a subsidiario is a distinct legal entity from its parent company. The parent company is protected from liability despite the formation of its Mexican subsidiary.
It is established under the authority of the law, and it has specific rights and responsibilities. It has a capital stock which is divided into shares. The stockholders are legitimately responsible for their own shares. Every partner in a subsidiario should purchase at least one share of stock.
Ensure that there is a verified documentation of your company details
Your company details should include the company partners, activities, terms and conditions, and selected board of directors. It is practical to consult a Mexican attorney and acquire title insurance as a precaution. The lawyer generally looks over the terms and conditions in both Spanish and English, so you must be knowledgeable about these languages’ basics.
Register your company’s name
To register the name of your company, you have to attain approval first from the Ministry of Foreign Affairs (Secretaría de Relaciones Exteriores). You can receive it in no more than 2 working days.
Get your Tax ID number
This process is simple but quite lengthy. First, you need to consult a public notary assigned by the government. They will then ask you to sign the incorporation deed before getting your tax registration. This process takes a maximum of 2 days.
After receiving your tax registration, you need to submit your incorporation deed to the Public Register of Commerce. You will receive confirmation after at least 17 days.
Once you have achieved these requirements, you can finally receive your tax ID number by simply registering with the Ministry of Finance and Credit (Secretaría de Hacienda y Credito Público). You have to wait for 1 to 3 days.
Social Security, Local Tax Administration, and the National Business Information Registration process
You need to register your company with different agencies to legalize your business. The first one is with Mexican Social Security (Instituto Mexicano del Seguro Social). To do so, you have to open individual retirement savings accounts for each of your future employees. This can typically take you 2 to 5 days.
Next, you need to pay a payroll tax to the local tax administration, also known as Secretaría de Finanzas del Gobierno del Distrito Federal.
Lastly, register with the SIEM (Sistema de Informacíon Empresarial Mexicano), an institution which keeps a comprehensive registry of all the existing businesses in Mexico. The cost depends on the number of employees you are willing to hire.
Declare your company with the Instituto Nacional de Estadística y Geografía
Also known as the National Institute of Statistics, this agency acknowledges your existence as a business entity. Forming a company in Mexico is never complete without being recognized by the national statistics.