Starting a business in Mexico
Starting a business in Mexico is complex and anything but straight-forward. There can be as many as thirteen different steps involved. The number of steps depends on whether the shareholders are Mexican or foreigners, in what industry the company will operate, and whether the company plans to import or export.
The Government of Mexico exercises very diligent oversight of corporations, involving several different agencies such as the Ministry of Foreign Affairs, the Mexican Tax Authorities, and the Commercial Property Registry. Each agency has its own separate requirements at the time of formation that require either authorizations and/or licenses. Additionally, the incorporation process in Mexico requires the use of a notary. A notary is an attorney who is authorized by the government to undertake certain legal actions such as formalizing wills, certifying official documents, and forming corporations.
Corporation vs Limited Liability Company.
The two most common business types in Mexico are the Sociedad Anonima de Capital Variable (S.A. de C.V.) and the Sociedad de Responsabilidad Limitada (S. de R.L.). These are both corporate entities in Mexico for purposes of the law. However, the S. de R.L. is very similar to a partnership and in most cases will be treated like a partnership for tax purposes in countries like the United States. In addition to the former, there is the Asociación Civil (Civil Association), Sociedad Civil (Civil Company), Joint-Venture, and Sociedad en Comandita (Limited Partnership). Most companies are overwhelming established as either an S.A. de C.V. or an S. de R.L.
Maintenance costs can be an impediment to forming a business in Mexico. The Mexican IRS (SAT or Hacienda as it is called in Spanish) requires monthly filings for tax purposes. This does not mean monthly payments, but filings based on income and business for the month… even if zero… must be filed electronically – otherwise stiff penalties are incurred. These filings may be taken care of by an officer of the company electronically, but in many cases require the retention of an accountant. The taxes to be filed may include income tax, the corporate flat tax, and the value added tax.
In addition to taxes, the government requires companies to contribute to social security and other social welfare programs on behalf of each employee. Mexican has a very robust employee-centered labor and employment law regime. Employees are entitled to certain bonuses, tenure, and profit-sharing among other things. Thought, depending on the size of the business, some of these laws are laxly enforced. Nevertheless, stiff penalties for in-compliance are possible and do occur.
If you are a business owner and you’re looking at starting a business in Mexico, you want to know a couple of things. First, there are two common types of companies in Mexico, the Corporation and the Limited Liability Company. You can recognize them by their abbreviations S.A. de C.V. and S. de R.L. It does not matter what type of business, big or small, you should operate under a formally organized business, which will offer a variety of protections from liability, while at the same time making it easier to operate in almost any industry.
Second, are you interested in exporting or importing? Manufacturing in Mexico is booming in industries from auto-parts to consumer electronics. There is plenty of room for your business to get a piece of the market, be it internationally or domestically within the expanding Mexican middle-class. We can get you started.
Third, incorporating can take about three weeks, but we make it simple.Give us a call and we can help you make the right choices about doing business in Mexico. You don’t even have to step foot in Mexico because we can handle everything online in a fast, safe and reliable way. We are licensed US and Mexican attorneys with a knack for helping people do business across the border.
Trust a company that keeps its word and cares about the success of its costumers. If you have questions about taxes, setting up a company, costs, and the other things you should know before starting a business in Mexico, let us know!