Step-by-Step Guide to Mexico Company Formation for Foreign Investors 

• In the present scenario, Mexico company formation is on the rise as several companies want to expand their business into Mexico. The Mexican economy has become the second-largest economy in Latin America.  The country provides a wealth of opportunities because of its proximity, trade relations, and strategic geographical location. However, to establish business in Mexico, companies need to navigate through the complex regulatory environment and the process of Mexico company registration. In this blog, we will discuss the step-by-step guide for Mexico company formation.  

Why opt for Mexico Company Formation? 

Close proximity 

• Mexico is closer to the United States and provides major logistical advantages such as short commute times, and easy oversight of the production process. This is beneficial for organizations engaged in the work of nearshoring, as close proximity allows for better supply chain management and communication.  

Centric economy  

• Mexico has developed a robust manufacturing sector, especially in industries such as automobiles, medical device manufacturing, and electronics. The Industrial Manufacturing, Maquila, and Export Services Industry (IMMEX) program enables foreign companies to operate manufacturing plants and benefits from duty-free imports and exports, this has reduced operational costs.  

Tax incentives  

• Mexico provides multiple tax incentives that majorly reduce the cost of operations. These incentives consist of deduction on fixed assets that ranges from 56% to 89% and additional benefits for labour training expenses in main sectors. These incentives can improve a company’s bottom line and encourage investment.  

Trade agreement  

• Mexico has 11 trade agreements that cover 44 countries such as the United States-Mexico-Canada-Agreement (USMCA), the country also offers businesses access to the international markets. This network leads to easy export and import processes which makes the country an attractive location for businesses wanting to expand worldwide.  

Competitive labor costs  

• Mexico has a large pool of skilled labor available at competitive costs. The country has also invested heavily in education, especially in STEM fields this has resulted in a workforce that generates more than 110,000 engineering graduates per year. The skilled labor workforce is available at a fraction of the cost when compared to the other countries, this improves operational efficiency for businesses.  

Types of Companies  

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

• This company is similar to the stock corporation and is the most common type of company in Mexico. It allows for an unlimited number of shareholders with the minimum capital requirements set at MXN 50,000 (approx. to $2700). In S.A de C.V. the liability of shareholders is limited that is it protects their personal assets from company debts.  

Sociedad por Acciones Simplificada (SAS) 

• This type of structure was created for small businesses and startups and was introduced in the year 2016. This company is formed by or more people, however legal entities can’t be shareholders. The annual income of the entity can exceed MXN 5 million (this is $235,000), or it should convert to another type of company.  

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

• This structure is like a limited liability company in the US and limits the liability of the members to their capital contributions. The members in this company can be between 2 to 50 and do not require a nominal capital investment. Small and medium-sized organizations usually prefer this type due to its flexibility and simple management structure.  

Sociedad Anónima Promotora de Inversión (SAPI) 

• This entity is a stock investment promotion company and facilitates access to venture capital for SMEs. It enables flexible share structures and governance which makes it suitable for businesses looking for investment. SAP can also issue different classes of shares and also have regulations for minority shareholders’ rights.  

Guide to Business Registration in Mexico 

Select your business structure 

• Select an appropriate legal entity that is S.A., S. de R.L. or others on the basis of your business needs. Each structure has its own different implications for taxes, governance, and liability.   

Register company name  

• The first step is to register your company name with the Ministry of Economy. The name should be unique and also comply with the legal naming regulations. The name registration can also be done online through the Public Registry of Commerce.  

Prepare necessary documents  

• Outline the structure, mission, and details of the shareholders of your company. Work with the notary public to prepare the Deed of Incorporation containing all the information. Also, create the bylaws that govern the internal operations of your company.  

Notarize 

• Now, sign the incorporation documents in front of the notary public, who will register your business with the Public Registry of Commerce.  

Get a tax identification number (RFC) 

• After notarization, apply for the Federal Tax Identification Number from the Tax Administrative Service (SAT). This number is significant for taxation purposes and should be included in all the official documents.  

Register with other authorities 

• In order to adhere to the national trade regulations, register your business with the SIEM which is the Department of Trade that is in charge of registry. Now, if you plan to hire employees, register with the Mexican Social Security Institute and National Workers Housing Fund.  

Open a corporate bank account  

• It is time to open a corporate bank account in Mexico in order to manage all your business finances. You need a bank letter of good standing to complete this procedure.  

Get necessary licenses  

• Based on the type of your business activities, you may require additional licenses and permits at local, state, and central levels. Make sure you are following the specific industrial rules and regulations to avoid any trouble.  

Registered address 

• It is necessary to have a physical office in Mexico for all your business operations. Mexico’s regulatory framework does not permit virtual addresses.  

Adherence to labor laws 

• If you are hiring employees, make sure you are adhering to the local labour laws, including employment contracts as well as social security obligations.  

Taxation and Compliance for Mexico Company Formation 

Corporate governance  

• Companies should hold an annual general meeting within the first four months of the year in order to approve financial statements, dividends, and administrative reports. Shareholders should be notified of the meetings. Businesses should also maintain and update corporate books about minutes from the AGM and resolutions passed.  

Labor  

• Businesses should create labor contracts and add any changes in the salary of working conditions. This will ensure adherence to the Mexican Labor Laws. Business owners are also required to submit annual reports to the Mexican Social Security Institute (IMSS) about any occupational diseases and work-related disabilities.  

Taxation  

• The standardized corporate income tax rate is 30% in Mexico, businesses should file annual tax returns and pay taxes throughout the year.  

• Business owners are required to distribute a portion of profits to the employees annually. Failure to do so will lead to fines.  

• A value-added tax of 15% is applicable on products and services.  

Conclusion  

• Mexico provides unparalleled opportunities to companies wanting to expand. By following the steps provided in this blog, companies can easily register their business in Mexico. For any assistance in the process of Mexico company registration, contact Tetra Consultants, and our team of experts will guide you.  

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