Key Step To Company Formations in Mexico

Mexico is on its way to becoming a top-ten economy in the world (Rank 12 at the moment) and that happens for a good reason.

The country has a consistent GDP growth, a weak currency, an expanding middle class and an improving security situation. These factors have made Mexico an attractive destination for foreign investors. This guide will walk you through the process of incorporating a company in Mexico, from choosing the right legal entity to opening a corporate bank account.

Insights about México's Economic Outlook

source:https://www.populationu.com/gen/countries-by-gdp

Do I Need a Legal Representative to Form a Company in Mexico?

Yes, Mexican law mandates that all companies registered in Mexico must appoint a legal representative before the local authorities. This individual can be either a Mexican national or a foreign national residing in Mexico with a legal permit to work in the country. (Ongresso possesses the pertinent contacts for this matter.)

Choosing the Right Legal Entity: The 3 Most Common Company Types in Mexico

Mexico offers a variety of legal structures for foreign investors to incorporate their businesses. Selecting the most suitable one depends on your specific needs and goals. Here's a breakdown of the three most common types of companies in Mexico, along with additional details to aid your decision-making process:

1. Sociedad Anónima (S.A.) - Corporation:

• Similarities: Similar to a corporation in the US, with shares representing ownership and the ability to increase or decrease capital over time.
• Requirements:
  • Minimum of two shareholders (individuals or corporations).
  • No minimum share capital requirement.
  • One or more directors, with no nationality or residency restrictions.
  • Must appoint a statutory examiner to oversee management, who may or may not be a shareholder.
• Pros:
  • Offers greater flexibility for future growth and potential public listing.
  • Easier transferability of shares, unless restricted by bylaws.
  • Clear separation of ownership and management.
• Cons:
  • More complex and expensive to set up and maintain compared to other options.
  • Greater regulatory requirements and ongoing compliance obligations.

2. Sociedad de Responsabilidad Limitada (S. de R.L. de C.V.) - Limited Liability Company (LLC):

• Similarities: Similar to an LLC in the US, offering limited liability protection to its members. 
• Requirements:
  • Minimum of two partners (individuals or corporations).
  • No minimum capital requirement, although most companies start with around $2,500 USD.
  • Requires only one manager, with no nationality or residency restrictions.
  • Statutory examiner is optional.
• Pros:
  • Simpler and less expensive to establish and maintain than an S.A.
  • Offers limited liability protection for partners.
  • More flexibility in management structure compared to an S.A.
• Cons:
  • Shares are not freely transferable and typically require approval from other partners.
  • Less suitable for raising capital through public offerings.

3. Sociedad Anónima Promotora de Inversión (S.A.P.I. de C.V.) - Publicly Traded Corporation:

• Similarities: A subtype of S.A. designed specifically for companies seeking to attract investment and promote innovation.
• Requirements:
  • Similar requirements to an S.A., but with fewer restrictions on share transferability.
  • Must comply with additional regulations related to public offerings and investor protection.
• Pros:
  • Ideal for companies seeking to raise capital through public offerings or from foreign investors.
  • Offers greater flexibility in share transferability compared to a regular S.A.
• Cons:
  • Most complex and expensive option to set up and maintain.
  • Subject to stricter regulatory oversight and ongoing compliance requirements.

7 Key Steps for Company Formation in Mexico

1. Decide on a legal entity. The two main types of companies in Mexico are corporations (S.A.) and limited liability companies (S. de R.L. de C.V.).
2. Choose a company name. It is important to develop 3-4 possible options and order them according to preference, as your desired name may not be available.
3. Identify the controlling beneficiary (UBO). Since January 1st, 2022, any entity incorporated in Mexico must identify its controlling beneficiaries on the official documentation to comply with tax provisions.
4. Draft the company's bylaws. The bylaws are a set of rules and regulations that govern the internal and external operations of a company.
5. Obtain a Tax Identification Number (RFC). Your newly formed company will need a tax ID before you can start doing business in Mexico.
6. Obtain a fiscal address. To register a company in Mexico, you must establish a fiscal address within Mexico.
7. Open a corporate bank account. Once your company is registered, you will need to open a corporate bank account.

How Long Will It Take to Successfully Incorporate a Company in Mexico?

If all of the steps are followed correctly and the legal representative is a local expert, the duration of company formation in Mexico takes approximately 10-12 weeks after all required documentation has been submitted.

• Can a foreigner own a business in Mexico? Yes, a business can be 100% foreign-owned.
• What are the different types of companies in Mexico that offer limited liability? The S. de R.L. de C.V. (Sociedad de Responsabilidad Limitada) is the most common type of company that offers limited liability in Mexico.

How Can Ongresso Help?

At Ongresso, we understand the complexities of incorporating a company in Mexico. Our team of experienced professionals can guide you through the entire process, from selecting the right legal entity to navigating the legalities and ensuring compliance with Mexican regulations. We offer a comprehensive range of services to foreign investors, including:

• Entity selection and formation: We will help you choose the most suitable legal structure for your business and assist you with the incorporation process.
• Legal and regulatory compliance: We will ensure that your company complies with all applicable Mexican laws and regulations.
• Tax advice and planning: We can connect you with tax professionals who can advise you on the tax implications of doing business in Mexico.
• Business establishment: We can assist you with obtaining the necessary permits and licenses to operate your business in Mexico.

Whether you are just starting out or are looking to expand your existing business to Mexico, Ongresso can help you navigate the process and achieve your goals. Contact us today to learn more about how we can help you.