Mexico is the second-largest economy in America, thanks to its strategic geographical location. 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 reasonable due to its recent commercial success which is deemed to be long-term.
The Mexican government strongly endorses globalization, so foreigners who are forming a company in Mexico find the process involved straightforward.
Benefits of setting up a company in Mexico
When starting up a company in Mexico, you can attain the following advantages, regardless of how small or big the company is:
- Full Foreign Ownership
- No Capital Controls for Repatriation of Profits
- Tax benefits and deductions
- Foreigners can establish a Limited Liability Company (LLC)
- Strong Property Rights and Protection
- No need for a bank trust
- Obtaining work visas
- Absolute control over your investment.
Factors to consider when setting up a company in Mexico
When setting up a company you may want to consider these factors:
- Business Factors -The business atmosphere of Mexico is reasonably easy to operate in for foreign companies, where initiatives have been launched to facilitate the incorporation process for companies, such as one-stop shops and introducing more lenient minimum capital requirements. It must be noted that Mexico’s historically elevated levels of corruption and high crime levels have raised security concerns for foreign companies which pose a problem for incorporation. These factors must be considered, in addition to the industry and type of business that will be conducted, the nationality of the headquarters or individuals, and the presence of existing trade agreements or relationships
- Location – Separate cities and regions may have different rules, costs, and availability. It is always recommended to seek advice on location from related specialists, such as business or legal advisors, accountants, and others, depending on your needs.
- Language – International language barriers can pose significant challenges to businesses looking to expand into new markets. Even experienced companies can run into difficulties with suppliers or partners when language differences can create miscommunications that could threaten their business plans in Mexico.
How to register a company in Mexico
Have you decided to expand your business to Mexico or incorporate a new company? – if so, we have compiled in this guide, the steps to a successful company formation in Mexico.
Find the right type of business structure
Identifying the applicable type of business organization for your company is the basis for company incorporation in Mexico and is necessary for the additional registration process. The most popular legal business entities in Mexico are:
- Stock Corporation (Sociedad Anónima, S.A.) – Mostly used by domestic and foreign investors
- Limited Liability Company (Sociedad de Responsabilidad Limitada, S. de R.L.) – also used frequently
Both legal entities grant limited liability to shareholders, where liability is limited to their capital investment.
Registration of the company’s name
Once you have chosen the type of company that you want to incorporate in Mexico, the following step is to submit an application to the Ministry of Foreign Relations where five possible company names are to be provided in order of your choice, for the company. This is done to guarantee that there is no company already incorporated in the country with the same company name.
Define your company’s capital
Prior to beginning operations in Mexico, both the amount and structure of your company should be determined through capital stock or shares. The minimum capital of each shareholder/partner must be 1 Peso.
Articles of Incorporation drawing up and approval
The incorporation document will include By-laws of the company’s name, the corporate purpose, social location as well as the investors’ name, and the capital construction, amongst other documents. All required documents need a legal official confirmation and an apostille. Once obtained, the documents have to be translated by an official Mexican translator.
Obtain your Tax ID (RFC) from the Mexican tax agency
The next step of your company formation in Mexico is to obtain your company tax ID, known as the Registro Federal de Contribuyentes (RFC) in Spanish.
To finish this step, you will have to visit the offices of Servicio de Administración Tributaria (SAT), which is the Mexican tax authority. One of our partner lawyers will take care of it.
The next step is tax declaration. The entity will be liable for the monthly tax declaration at the tax authority SAT (Servicio de administracion tributaria). Please bear in mind a power of attorney is required for tax declarations.
Registration of employees
For employees’ hiring processes, it is essential to register the company at the social security and the National Worker´s Housing Fund.
Please keep in mind that there is a specific permit to hire foreigners which is called Constancia de empleador. This authorization has to be renewed yearly after the annual financial statements or if the company changes its legal representative or the company´s fiscal location.
Registration of a foreign investment
Registration of foreign investment capital applies in the event that one of the business owners’ nationality may be other than Mexican. Registration at the Ministry of Foreign Investment has to be done within 40 days after the business incorporation date.
Open a corporate bank account
As the last step, you can proceed to open a company bank account. The legal representative of your company can complete this step, the bank will require the company RFC and your company information. Choose a local bank that offers you the best pricing structures regarding international transactions and other processes that you consider significant. It’s recommended to contact a local professional who is knowledgeable about this process.
Starting your business
Congratulations! You can start with your business operation in Mexico.
Contact Damalion if you need assistance in setting up a company in Mexico. We are looking forward to working with you!