Navigating the Legal Landscape: Mexico Business Registration Requirements 

• Mexico business registration has become a new trend in the global business landscape. This is because Mexico has recently emerged as a competitive country for investments at international level because of the size and strength of its consumer market. The country has become the world’s 10^th most populated country and ranks 12^th by the nominal GDP. The country has also established its position as the 2^nd largest economy in Latin America and is growing at an impressive rate. For starting a business in Mexico, it is necessary to navigate the complex legal landscape of the country as Mexico company registration has proven to be a daunting task. The following blog provides a detailed guide on the registration requirements you need to fulfil to start a business in Mexico.  

Why should you start your business in Mexico? 

• Mexico has become an attractive destination for businesses wanting to expand or relocate their operations. The Mexican economy is resilient and predicted to grow significantly in the upcoming years. Currently, it is the second-largest economy in Latin America and is expected to grow past many European nations by the year 2050. Furthermore, the economy is highly diversified with powerful sectors in production, technology, and services. Labour costs in Mexico are 30-40% lower than in the US. This affordability enables companies to sustain competitive operational costs without compromising on the quality of their products and services.  

Main Legal Entities for Starting a Business in Mexico 

• There are 3 common key legal entities in Mexico that businesses can establish, and each has its own distinct characteristics and legal requirements. These entities are: 

Sociedad Anónima de Captal Variable (S.A. de C.V.) 

• This entity is also known as S.A. de C.V. and is similar to a corporation in the US. This entity can have an unlimited number of shareholders with no personal liability. This type of corporation is taxed on its earnings and shareholders are taxed on the basis of their distributed dividends.  

Sociedad de Responsabilidad Limitada de Capital Variable (S. de R.L. de C.V.) 

• It is similar to the limited liability company in the US, providing limited liability to its partners. It allows up maximum of 50 partners and these partners take part in the management decisions and also hold non-negotiable corporate interests.   

Sociedad Anónima Promotora de Inversión  

• This type of corporation is a sub-type of S.A. and is created to attract investments and facilitate easy access to the capital markets. It is controlled by the Securities Market Law and has more governance structure that is beneficial for companies wanting to go public 

Preconditions to Meet Before Mexico Business Registration  

There are some pre-conditions that you should meet before starting out the registration procedure: 

Acquire a CURP 

• CURP stands for Clave Única de Registro de Población and is an 18-character alphanumeric identification code provided to every resident in Mexico even foreigners. This code is required for multiple official procedures, such as applying for a tax identification number, registering with government agencies, and even opening a bank account. This code eases the process of interactions with government institutions and is necessary for accessing services such as healthcare.  

Reserve a company name  

• Select 3 to 5 potential names for your business and then file an application with the Ministry of Economy to request authorization for the selected company name.  

Prepare the articles of incorporation  

• Articles of Incorporation is a legal document that formalizes the formation of a company and provides its essential characteristics. It should be notarized and filed with the Public Registry of Commerce.  

Prepare necessary documents  

You need to prepare the necessary documents for your company registration.  

• Identity- Valid identification which could be either a passport or national ID is necessary for all the directors and shareholders.  

• Articles of Incorporation- Create an article that provides an outline of your company’s purpose, vision, mission, structure, and operational rules.  

• Power of Attorney- If you are applicable, create a notarized power of attorney for a legal representative who is going to act on behalf of the business.  

• Residential Proof- Provide necessary documents proving the residence of the legal representative or shareholders like the utility bill.  

• Bylaws- Draft internal rules and regulations that govern the management and operations of your organisation. 

Registration with the relevant authorities  

• Tax Identification Number- Get a Federal Tax Identification Number from the Tax Administrative Service (SAT) for taxation purposes. 

• National Business Information Registry (SIEM)- It is necessary to register your company here in order to adhere to all the business regulations.  

• Public Registry of Commerce- It is compulsory to register your company with this authority in order to formalize its existence.  

• Local Address- You must have a registered physical office in Mexico where all the official documents are sent and from where your business is going to operate.  

Compliance Obligations for Businesses in Mexico 

Corporate tax compliance  

• Organizations are required to file monthly tax and annual tax reports such as income tax, employee-related tax, and value-added tax. All organizations should incorporate electronic invoicing systems that adhere to the updated Comprobantes Fiscal Digital por Internet (CFDI) regulations in order to track transactions effectively. If organizations fail to adhere to these compliances it will result in fines.  

Environmental compliance  

• Organizations should follow legal requirements for the benefits of employees such as vacation days, severance packages, as well as social security contributions. Companies should follow the specific rules that govern subcontracting arrangements to avoid fines. Consistent updates to the internal labor policies are significant to align with the modifications in labor laws, and these should be registered with labor courts.  

Anti-Corruption and AML  

• Organizations should sustain transparent records and report any suspicious transactions as per the anti-corruption laws. Incorporating new anti-corruption training programs for employees is encouraged to promote ethical conduct inside the company.  

Consistent audits  

• Conduct consistent internal audits to recognize areas of non-compliance and make sure compliance with the established protocols. These audits should be performed ideally by independent third parties.  

Financial compliance  

• Organizations are required to hold annual general meetings within the first four months of the year, where the financial statements and the other main decisions are approved. Carefully record the minutes for general yearly meetings along with annual resolutions in corporate records.  

Conclusion  

• On coming to the conclusion staying up to date with the regulatory landscape is necessary for companies wanting to operate smoothly in Mexico. Mexico business registration provides major opportunities that require careful navigating of legal and administrative procedures. It is necessary to understand the process and follow the compliance obligations to make sure a smooth registration process. If you are looking for professional expertise regarding opening your business in Mexico, contact Tetra Consultants and our team of experts will guide you through the complex regulatory framework.  

• Contact us and our team will get back to you within 24 hours