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 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, with initiatives to facilitate incorporation, such as one-stop shops and more lenient minimum capital requirements. Note that Mexico’s historically elevated levels of corruption and high crime have raised security concerns for foreign companies. These factors must be considered in addition to the industry and type of business, the nationality of the headquarters or individuals, and the presence of existing trade agreements or relationships.
- Location – Cities and regions may have different rules, costs, and availability. Seek advice on location from specialists (business/legal advisors, accountants, etc.) based on your needs.
- Language – International language barriers can pose significant challenges. Even experienced companies can run into difficulties with suppliers or partners when language differences create miscommunications that could threaten 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, this guide compiles the steps to a successful company formation in Mexico.
Find the right type of business structure
Identifying the applicable type of business organization is the basis for company incorporation in Mexico and is necessary for additional registrations. The most popular legal entities 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 frequently used
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 to incorporate, submit an application to the Ministry of Foreign Relations with five possible company names in order of preference. This ensures no company already exists in the country with the same name.
Define your company’s capital
Before beginning operations, determine the amount and structure of your company’s capital (stock or shares). The minimum capital of each shareholder/partner must be 1 peso.
Articles of incorporation: drafting and approval
The incorporation document will include the by-laws (company name, corporate purpose, registered office), investors’ names, and capital structure, among other details. All required documents need legal certification and an apostille. Once obtained, the documents must be translated by an official Mexican translator.
Obtain your Tax ID (RFC) from the Mexican tax agency
The next step is obtaining your company tax ID, known as the Registro Federal de Contribuyentes (RFC).
To finish this step, you will visit the offices of the Servicio de Administración Tributaria (SAT), the Mexican tax authority. One of our partner lawyers will take care of it.
Tax declarations
The entity will be liable for monthly tax declarations at SAT (Servicio de Administración Tributaria). Please note: a power of attorney is required for tax declarations.
Registration of employees
For hiring employees, it is essential to register the company with social security and the National Workers’ Housing Fund.
Please keep in mind there is a specific permit to hire foreigners called Constancia de empleador. This authorization must be renewed yearly after the annual financial statements or if the company changes its legal representative or fiscal address.
Registration of foreign investment
Registration of foreign investment capital applies when any business owner has a nationality other than Mexican. Registration at the Ministry of Foreign Investment must be completed within 40 days after the incorporation date.
Open a corporate bank account
As the last step, open a company bank account. The legal representative can complete this step; the bank will require the company RFC and corporate information. Choose a local bank that offers the best pricing for international transactions and other important services. It’s recommended to work with a local professional familiar with the process.
Starting your business
Congratulations! You can start operating your business in Mexico.
Contact Damalion if you need assistance in setting up a company in Mexico. We look forward to working with you!
