With an active culture, and a diverse and skilled workforce, the benefits of doing business in Mexico are very strong.
Presently, Mexico has a total of 13 free trade agreements (FTAs), and these FTAs connect Mexico with 50 different countries, providing investors and entrepreneurs with significant opportunities for massive growth.
`Ranking 15th on the list of worldwide economies, Mexico is also the gateway to other Latin American countries from a business viewpoint.
The process of incorporating a company in Mexico contains several steps with strict rules. The process can take quite a long time if you don’t understand the local regulations and policies. So it’s highly recommended to have the right firm, e.g. Damalion, by your side to help with the process.
Here are a number of conditions to address when considering starting a company in Mexico:
Choose the type of Mexican entity you need for your business in Mexico
The first step to incorporating a business in Mexico is deciding on the entity type:
The two most prominent entity types in Mexico are the Corporations (Sociedad Anonima or S.A) and the Limited Liability Companies (Sociedad de Responsabilidad Limitada or S. De R.L.). There is also a third type of entity that is gaining popularity: the Mexican investment promotion company (Sociedad Anónima Promotora de Inversion or S.A.P.I.)
The S.A. and the S. De R.L. have similar features and requirements, which includes the following:
- They both have limited liability
- They both required a resident Mexican legal representative
- Shareholder annual meetings are mandatory for both
- Both required a domestic address
- Tax return and financial statement filings are compulsory for both
- A minimum of one director/manager and a minimum of two stockholders/partners
The S.A.P.I. is similar to the S.A. but with more minority shareholders’ rights and tax benefits. It is usually used in real estate and capital-intensive projects.
It is also important to decide if a person will physically present in Mexico for the incorporation or if they will entrust the process to an expert in Mexico who can assist and make the process easier.
Choosing a name for your Mexican company
After deciding on the type of entity, it is time to decide what the name of the business will be. It is essential to come up with three choices to request from the Mexican Department of Economy (Secretaría de Economía).
Governance and Registration
If the Mexican entity has foreign shareholders, there are several documents required to support the incorporation. Some of these documents need to be notarised and apostilled or legalized to be effective in Mexico.
If an expert was assigned in Mexico to assist with the incorporation and acts on behalf of foreign shareholders, a specific Power of Attorney (PoA) needs to be prepared and sent to be signed by the shareholder or their representatives (apoderados) which must be notarised and apostilled in order to be effective in.
While all incorporation documentation and information are being formalized, company bylaws must be drafted, as all corporate entities in Mexico must have these. The articles of incorporation will be added according to the bylaw specifications. It is necessary that the bylaws of any company be notarized.
After the documents are signed and submitted to the public notary, the legal process of incorporation is will be completed. The timeline to finish this step may differ depending on when the signed, notarised and apostilled documents are received by the Mexican public notary.
The steps described here must be done in person, not virtually. The Mexican public notary also oversees the registry of the company before the Public Registry of Commerce in the city where the company will have its social domicile.
Note that if the capital of the new company comes from foreigners investors, it is compulsory to get the registration before the National Register of Foreigner Investments (Registro Nacional de Inversiones Extranjeras or RNIE), within 40 working days after the signing of the company Incorporation Deed.
Getting a Mexican Tax ID
The newly incorporated company needs a Tax ID number to conduct business in Mexico. Without the Tax ID number, all critical registrations like registering before the Foreign Investments Registry, applying to open a bank account, or issuing invoices, will be impossible.
The person who is acting on behalf of the company will go in person to the Tax Authority with the Articles of Incorporation to request the Tax ID.
It is significant to take into consideration that in order to get the Tax ID, the business must have a physical office in Mexico which must be proven by an authorized proof of domicile.
Opening a corporate bank account for the Mexican company
Newly incorporated companies in Mexico must have a bank account since taxes can only be paid by Mexican banks. This process can only take place after the business has already received the Tax ID.
Complying With Anti-Money Laundering Law
After the incorporation of the new company, the Mexican anti-money laundering law emphasizes the Notary Public to attach assigned forms with specific information about the founding partners of the new company to the Incorporation Deed. This is done in order to keep the company on the legal path.
Although foreigners can own 100% of a Mexican company or start a business in Mexico with ease, there are still some crucial things to consider from a legal viewpoint. So, it’s highly recommended to research the legal framework of Mexico in advance.
To start your business in Mexico, let’s go ahead and contact your Damalion expert now.
