Overview of The Companies In Mexico: Economic Feasibility
Mexico has been a prosperous nation in many aspects. You can see it in its culture, people, natural resources, and economy. Combining these elements has resulted in this nation being the second largest economy in Latin America. It is even growing at an astonishing rate. Economic experts estimate this nation to be the 7th largest global power in the world by 2050. As early as now, many local and foreign businessmen and investors have been considering the opportunity of building companies in Mexico.
Of course, this nation did not walk the path of roses on its way to success. Mexico has encountered a devastating earthquake in September of 2017, which led to casualties and destruction. The recovery from such tragedy resulted to a slight decrease in growth the following year. Surprisingly, Mexico rose from the ashes and got back up to its progressive economic standing.
The Mexican market is very versatile, dynamic and interesting to look forward to. Every time a new and unique product emerges, many follow immediately. This might have made Mexico an arena for innovative markets, but it also served as a vehicle for GDP growth
An example of Mexico’s booming industry is the production of medical equipment and devices. Pro-Mexico, a governmental agency responsible for encouraging foreign investment, values this industry at over USD$13 billion as of 2016. The report adds that Mexicans save expenses of over 20% compared to the US.
This industry is just one of Mexico’s economic hotspots that are driven by an amazingly cultivated and accessible workforce. The trinity of groundbreaking industries, cheap production costs, and a competent workforce works with any industry. Mexico applies it well, which is why their economy is on point all the time.
Basic Types of Businesses in Mexico
The most forthright way of capitalizing these opportunities is to incorporate a company in Mexico directly into the local market. But first, you need to know the most prevalent types of legal entities you can form in this nation.
- Stock Corporation (Sociedad Anónima de Capital Variable)
- Limited Liability Company (Sociedad de Responsabilidad Limitada de Capital Variable)
- Simplified Shares Company (Sociedad por Acciones Simplificada)
The three mentioned above are the most usual company types you can find. However, it is worth noting that there are two more groups such as:
- Stock Corporation for Investment Promotion (Sociedad Anónima Promotora de Inversión)
- Multi-Purpose Financial Company (Sociedad Financiera de Objeto Múltiple)
These two corporate forms emphasize on companies entering the Mexican Stock Exchange (Bolsa Mexicana de Valores or the BMV). For now, we will not be focusing on these companies. If you have questions regarding these company structures, simply get in touch with our team.
Stock Corporation (Sociedad Anónima de Capital Variable)
This is the most popular structure among all companies in Mexico. The key characteristics of the Stock Corporation are the following:
- When you form a stock company, its ‘value’ is divided into shares. Typically, the creditors protect these shares.
- Stock Corporations have no restrictions on the number of shareholders who can invest in the company. This means you can easily raise the necessary capital even if your company is relatively new.
- The required capital is MXN$50,000 or approximately USD$2,700.
- This structure has the largest possibility for growth and profit, despite its bureaucratic and administrative burdens.
Limited Liability Company (Sociedad de Responsabilidad Limitada de Capital Variable)
Limited Liability Companies fall behind Stock Corporations in terms of popularity. Like the SC, each LLC base its value on shares. Other distinguishing features include the following:
- An LLC is very practical for small and medium enterprises.
- The initial deposit to form the company is just MXN$3,000 or approximately USD$160.
- Members of the LLC pay their individual share of taxes through tax returns, instead of paying as a collective company.
- Every members’ assets have guaranteed protection. This means they are only accountable for their own shares in the company.
Simplified Shares Company (Sociedad por Acciones Simplificada)
Another major company structure is the Simplified Shares Company. You don’t only see these companies in Mexico, but in Argentina and Colombia as well. It is a fairly new concept that gained a reputation in 2016 as part of the reformed General Law of Commercial Companies. Mexico is taking momentous steps to open up its market for foreign investment. To make this happen, the government has modified the commercial legislation to streamline and encourage foreign operations.
Some key characteristics of the Mexican Simplified Shares Company include:
- The formation process for this company is cheaper and faster than SC and LLC.
- It has a simple corporate structure, ideal for SMEs looking for an easy client-provider route.
- This company structure’s downside is that there’s an annual maximum allowable revenue of MXN$5,000,000 or approximately USD$265,000. If your company has a vision on exceeding this limit in the future, you may eventually need to adjust to a different structure.
Get Involved With Other Companies in Mexico
The ideal corporate structure of your business will depend on its objectives and goals. You can find thousands of companies in Mexico who have successfully managed to align their mission-vision statement with each structure. Before jumping in and incorporating your business, it is wise to access local experts who can guide you on your Mexican operations.
We will state this again: Mexican markets have an enigmatic and dynamic market. There’s a wide range of appealing industries and sectors you can choose from. What matters most is you acquire all the necessary documentation and approval by the authorities.
Speaking of authority, Biz Latin Hub is a front-runner in providing assistance and consultancy services for companies in all major Latin countries. Get in contact with the office for personalized information and support.