Starting a business in Mexico

If you are a business owner and you’re looking at starting a business in Mexico, you want to know a couple of things. First, there are two common types of companies in Mexico, the Corporation and the Limited Liability Company. You can recognise them by their abbreviations S.A. de C.V. and S. de R.L. It does not matter what type of business, big or small, you should operate under a formally organized business, which will offer a variety of protections from liability, while at the same time making it easier to operate in almost any industry.

Second, are you interested in exporting or importing? Manufacturing in Mexico is booming in industries from auto-parts to consumer electronics. There is plenty of room for your business to get a piece of the market, be it internationally or domestically within the expanding Mexican middle-class. We can get you started.

Third, incorporating can take about three weeks, but we make it simple.Give us a call and we can help you make the right choices about doing business in Mexico. You don’t even have to step foot in Mexico because we can handle everything online in a fast, safe and reliable way. We are licensed US and Mexican attorneys with a knack for helping people do business across the border.

Trust a company that keeps its word and cares about the success of its costumers. If you have questions about taxes, setting up a company, costs, and the other things you should know before starting a business in Mexico, let us know!

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Practical Points for Starting a Business in Mexico

Shareholders and Resident Directors: Many clients inquire whether a Mexican director or shareholder is required. Neither a Mexican shareholder nor Mexican resident director are required. Foreigners may own and operate Mexican company’s 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 a 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.

Corporate Bank Accounts in Mexico: 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.

Local Registered Office and Addresses: A local registered office is required for all Mexican companies. This requirement is strictly enforced. The Mexican tax authorities will perform in many cases a site visit to confirm the operations of the company. It is therefore necessary for someone to be present at all times at the registered address with knowledge of the company in the case of a visit. If the company has employees, it must be registered with the Mexican Social Security Institute (IMSS). If the company does not pay its employee contributions, the authorities will visit the registered office to charge outstanding deductions. In either case, the registered address or office requirement should be taken very seriously for a Mexican company. Many clients do not understand this starting a business in Mexico. In jurisdictions like the United States, a simple address associated with the company is sufficient, with a cost of $50 dollars a year in places like Delaware.

In Mexico, the registered office or address may be subject to a lien by the government for amounts due and the company subject to fines if the registered office is not maintained. All changes to the registered office must be made no later than 30 business-days from a change in address or the Mexican Company may face a fine. The above-mentioned points commutatively mean that registered offices or address cost a least $100 USD per month as a result of the risk involved.

Employees and Payroll: Mexican labor law is complex. Even though most Mexican companies do not adhere to the letter of the law, this can be problematic if the authorities catch you. Mexican companies are bound by the constitution to provide health care, social security, retirement and other extensive benefits to employees. This includes mandatory vacation, holiday’s, overtime, and severance pay if dismissed without cause. All labor contracts should be executed in Spanish or Dual-Column English/Spanish (or another language alongside the Spanish version). In most cases, the employee should be given a temporary contract which permits employment during a probational period for 30 to 90 days. This is a manner in which Mexican company’s can limit their exposure.

It is also a requirement for the company to profit share with employees after several years of operations. I common way to avoid profit sharing is for companies to either have employees contracted under an external Human Resources company, or for the company to incorporate a separate Mexican subsidiary company that contracts the employees separately. This greatly reduces operational risk and the need to profit share. However, all transfer-pricing rules for related entities would apply in such cae.

Employee benefits and deductions can be quite costly with matched contributions from the employer and the employee. Here is an example break down for an employee that makes about 1,500 USD per month or 30,000 Mexican Pesos.

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