Starting a Business in MexicoAn Overview to Incorporating in Mexico
Overview of Incorporating 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.
With MexicanIncorporation.com you do not have to be a legal expert to do business in Mexico. We are the experts. So just sit back and run your business. But before making any decisions you should know the basics of incorporating in Mexico. Mexico, just like in many other countries, has a regular run-of-the-mill company form. It is called an S.A. de C.V…. and is like an “.Inc” company you would find in the United States, for example. We’ll go ahead and spare you the legal jargon and cut to the chase.
If you see a company name in Mexico with the ending “S.A. de C.V” for example, “Sprockets Exporters de Mexico, S.A. de C.V” you should immediately think “.Inc” That part at the end of the name is the Mexican equivalent of “.Inc”, which we all know and love in other parts of the world. You might also see it as simply “S.A.” without the “C.V.” For smaller enterprises you may want to look at the less formal LLC in Mexico, the S de RL.
Is a Mexican Corporation or SA de CV right for me?
If you have a larger number of shareholders in your company and are looking for a more formal arrangement with your partners, than the Mexican Corporate form or S.A. de C.V. is really what you should look at. Think about the following:
Do you and your business partners not have a close working relationship?
Do you tend to deal with each other at arm’s length?
Do you want to be required to hold formal shareholder meetings, with minutes, and strict accounting regulations?
Will there be more than 50 shareholders of the company?
If these things apply to your business, a Mexican Corporation is probably the best form for you. I stress, sometimes formality is what is required when one is dealing with business partners who one does not know well and where transparency is a major factor. However, I also stress, the Mexican Corporation is a formal entity, and complying with all the requirements to keep the company running according to the law entails paying accountants and lawyers. The Mexican Corporation or S.A. de C.V. form offers security and transparency, however at an increased operating cost.
If your company has more than 6 shareholders but especially if you have say… more than 10 shareholders, you really should consider an S.A. de C.V. Additionally, with that many shareholders contributing to the operational costs of the company, perhaps the money required to pay accountants and attorneys won’t be such a big issue (in theory). What are the basic characteristics of a Mexican Corporation or S.A. de C.V.?
Here are some basic characteristics of Mexican Corporations you should consider. First, the minimum investment to start a Mexican Corporation is about $3,782 United States Dollars. Second, the Company must have at least two people who will be shareholders. This is different from the United States where a single shareholder can own all of the company’s stock. Third, the company must appoint a disinterested person to oversee the operation of the company on behalf of shareholders. Fourth, you have to hold annual shareholder meetings and keep monthly financial reports. Fifth, the company requires a permanent address in Mexico (which we can provide). In a nutshell, that’s basically what you have to know.
Practical Points for Incorporating in Mexico:
Many clients inquire whether a Mexican director or shareholder is required. Neither a Mexican shareholder nor a Mexican resident director are required. Foreigners may own and operate Mexican companies without limitation in most cases. However, it is true that as a practical matter, it may be necessary or recommended to authorize your accountant or attorney with limited corporate power. This is especially necessary when signing import documentation or other documents that may be required from time to time for licensing. Nevertheless, a local shareholder or resident director is not specifically required.
Mexican bank accounts in many cases are the most difficult part of opening a Mexican Company or starting a business in Mexico. Bank policies often vary from branch to branch slightly, and overwhelming change from bank to bank. The most import consideration when opening a Mexican bank account is the nationality of the signatory and whether or not physical presence is required for signing documentation.
In some cases, the Mexican bank will require that the foreigner or director of the company to physically travel to Mexico for purposes of opening the corporate bank account and signing the banking contracts. This is a major hassle and can present serious problems and delays. It is best to find a bank that will permit the foreign corporate representative to sign the banking contracts and forward originals by mail. This is an essential first question.
Whether or not a foreigner can sign corporate banking documents is therefore also an essential question to ask. The Mexican bank may require that the signatory of the corporate bank account for the Mexican Company be either a Mexican citizen or obtain Mexican residency. In our Firm’s years of experience, this requirement can often vary from depending on the bank. However, to avoid this, some client’s will have their attorney or accountant sign the bank contracts on their behalf. This can make some client’s feel uncomfortable. For other client’s there may be no other option. If this is not possible, you will need to provide your accountant or attorney with a corporate power of attorney limited enough for purposes of executing banking contracts.
It is common for Mexican banks to exercise a great deal of due diligence upon client’s operations given recent issues with security in the country related to money laundering. Client’s may be requested to provide detailed information including corporate organizational structures, tax payer identification numbers for foreign shareholders, invoicing and proof of previous operations in foreign countries.
Video: Overview of Doing Business in Mexico
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