If you are thinking about moving to Mexico and starting a business down here, you have to take into consideration federal, state and municipal regulations that affect 4 stages in the life of a small to medium-size domestic firm:
- Starting a business
- Dealing with construction permits
- Registering property
- Enforcing contracts
The process of setting up a business in Mexico is not normally difficult or complicated. However, there are a certain number of obligatory steps that must be followed.
The involvement of all of the following is required: a Public Notary (Notario Público) and one of the Notary’s lawyers, the Mexican tax authorities (SAT) and the Registry for Foreign Investment if any of the owners of the business do not have permanent resident status. Thus it is not possible to say how long the process will take, although it can be relatively quick.
The law governing the creation and operation of a business in Mexico is the Ley General de Sociedades Mercantiles (website in Spanish). A Sociedad Civil and Asociación Civil (non-profit association) is governed by the Código Civil Federal.
Note: Requirements for business licensing and registration can vary for different types of business, across different business sectors, and in different states and municipalities. This section provides an overview of the process, and professional advice (from a lawyer, accountant or other specialist) should always be sought.
Who Can Set Up a Business in Mexico?
Anyone who has the legal right to be in the country, or who has appointed power of attorney in the business start-up process, can open a business. The Mexican legal system does not distinguish between foreign and domestic ownership, although if a company is owned or part-owned by anyone not permanently resident in the country, a declaration needs to be made to the Mexican Institute for Foreign Investment.
The Mexican tax system does not distinguish between businesses owned by Mexican nationals (or by Mexican corporations) or those owned by foreigners (or by foreign corporations), subject to the provisions of any double taxation agreements that may exist.
Where to open a business?
Doing business is easiest in Colima, Aguascalientes, Mérida and Celaya among 32 Mexican cities surveyed in Doing Business in Mexico 2014. The Ease of Doing Business Index for Mexico averages each city’s percentile rankings on the four topics previously mentioned, giving equal weight to each.
What type of business entity to open?
The most common types of business entities that can be formed in Mexico are:
Sociedad Anónima (S.A.) (similar to a public limited company or corporation). An S.A. can either have fixed or variable capital. If the latter, the company becomes a Sociedad Anónima de Capital Variable, or S.A. de C.V. (public limited company or corporation). Minimum capital is always fixed by law, although it is not necessary for the minimum capital to be paid up at incorporation.
Sociedad de Responsabilidad Limitadada (S. de R.L.) (Limited Liability Company): This can have either fixed or variable capital, although the name is the same in either case.
Sole Trader: An individual with a business activity who uses their own name for business and tax purposes. The sole trader registers with the tax authorities as a Persona Física con actividad empresarial.
Sociedad Civil (S.C.): This type of business is mainly used by people who provide professional services, for example accountants and consultants, who do not deal in any form of tangible goods.
Asociación Civil (A.C.) (non-profit association): This is normally used for non-profit-making organisations, for example charities, clubs and business and trade associations.
Steps required to set up a business in Mexico
The first step is to decide which type of company is to be formed. Once this has been decided the following steps are required to set up a business (with the exception of a sole trader):
a) Choose a company name
Obtain authorisation from the Department for Trade (Secretaria de Economía) for the company name to be used. This can either be done online or via the Notary Public (Notario Público).
b) Draw up the Deed of Incorporation
Choose a Notary Public to draw up the Deed of Incorporation. Note that the notary can also be chosen at the beginning of the start-up process to obtain authorisation for the company name.
c) Sign the Deed of Incorporation
It must be signed in the presence of the Notary. For this the following are required:
- The presence of all owners (socios) of the company mentioned in the Deed (the Deed will also specify the shareholdings of each owner)
- Identification documents of each owner. For Mexican citizens any form of official ID is sufficient (for example passport, Elector´s Card (IFE), Cédula Profesional). For foreigners their passports and proof of legal presence in the country, for example a residence permit or tourist visa are required
- Proof of address (Comprobante de Domicilio) of each of the owners (usually a utility bill not more than three months old).
d) Register the business address
Obtain a registered address (Domicilio Fiscal) for the company.
e) Registration for tax purposes
Register the company for tax purposes with the Mexican Tax Authorities (SAT). This can be done at any local office of SAT.
f) Businesses open to the public
If the business involves a shop or activity open to the public, it is also necessary to notify the Local Government (Municipio) of the opening of the business.
g) Registering employees
If the business is to hire employees, register the business with the Mexican Social Security Institute (IMSS) and the National Worker´s Housing Fund (INFONAVIT).
h) Register with the SIEM
Register with the National Business Information Registry (SIEM). This registry is run by the Department of Trade (Secretaría de Economía).
i) Foreign Investment Register
If one or more of the owners is a foreign national without permanent residence status, it is also necessary to register the business with the Foreign Investment Register (Registro Nacional de Inversión Extranjera) (part of the Department of Trade).
This must be done in person within 40 working days of incorporation of the business by someone designated in the Deed as having power of attorney (poder).
A form must be filled in and submitted along with a copy of the Deed and the identification documents of the person doing the registration. (Note that this registration must be renewed every year).
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