How to start your business in Mexico in 7 easy steps

For three consecutive years, Mexico has been ranked as the 4th most complex jurisdiction for business operations in the Global Business Complexity Index (GBCI). Its intricate rules and regulations present unique challenges, such as the intricacies of setting up a bank account and obtaining work visas.

Moreover, recent modifications to Mexican tax law have introduced additional requirements, such as the mandatory disclosure of controlling beneficiaries to a public notary before incorporation. A controlling beneficiary is any individual who benefits from or has decision-making power within the entity’s structure. 

Understanding these complexities is crucial for any investor aiming to successfully launch and sustain a business in Mexico.

In this article, we will guide you through the seven essential steps to start your business in Mexico, ensuring you are well-prepared to tackle these challenges and capitalize on the opportunities available in this vibrant market.

Why incorporate in Mexico?

Incorporating in Mexico offers numerous advantages for foreign investors, despite initial perceptions of complexity. The country’s vibrant culture and expanding economic landscape make it an enticing venue for setting up a company. With our services, at BLP we guide investors through the incorporation process, simplifying and demystifying what may initially seem like a daunting task. Here’s why establishing your business in Mexico is a strategic decision:

What are the Advantages of Incorporating in Mexico?

• Location:
  
  • Proximity to the United States: Mexico's border with the United States provides unparalleled access to the U.S. market, facilitating easier logistics and distribution.
  • Access to Latin America: Located at the heart of Latin America, Mexico serves as a gateway to North and South American markets, presenting expansive market outreach.
• Commercial Treaties: Mexico is a signatory to numerous international free trade agreements, such as the United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA. These agreements reduce trade barriers and provide preferential access to key markets, enhancing the competitive edge for businesses operating out of Mexico.
• Growing Economy: Mexico boasts a diverse and growing economy, from manufacturing to digital technology. This economic diversity opens up multiple opportunities for businesses to thrive in various industries.
• Qualified Workers: With a robust educational system and numerous higher education institutions Mexico has a vast pool of educated and skilled professionals. The availability of such a workforce is a significant asset for any business looking to maintain high operational standards and innovation.

Incorporating in Mexico not only positions your company in a strategic geographical and economic context but also integrates it into a framework designed for business growth and expansion. Our BLP services ensure that the complexities of the process are handled efficiently, allowing you to focus on the growth and development of your new venture in this dynamic country.

What are the company types in Mexico?

In Mexico, several types of company structures cater to different business needs and sizes. Each type has its specific characteristics, benefits, and legal implications. Understanding these can help you choose the most appropriate structure for your business venture.

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

This is the most popular type of corporate structure in Mexico, favored for its flexibility in capital structure. It offers corporate protection, shielding shareholders from liabilities incurred by the corporation beyond their capital contributions. 

The variable capital component allows for the increase or decrease in capital without the need for formal amendments to the company bylaws, making it ideal for businesses that anticipate fluctuations in capital needs.

Stock Corporation for Investment Promotion (Sociedad Anónima Promotora de Inversión, S.A.P.I.)

Similar to standard stock corporation, S.A.P.I. is designed specifically to facilitate investment. It offers more freedom in drafting shareholder agreements, which can include provisions for their exit strategies, voting rights, and other corporate governance matters.

This structure is particularly suitable for ventures that require significant external funding and where investors seek to have an active role in management. A board of directors is a mandatory requirement, ensuring structured governance.

Limited Liability Company (Sociedad de Responsabilidad Limitada de Capital Variable, S. de R.L. de C.V.)

This type of company offers limited liability to its partners, meaning that each partner's financial risk is limited to their contribution to the company's capital. The addition of the variable capital component provides flexibility in adjusting capital contributions without extensive bureaucratic processes. 

It is particularly recommended for small, privately-held businesses or family-owned enterprises due to its restrictive nature concerning the transfer of shares to new partners, which helps maintain control within the existing group of partners.

Simplified Shares Company (Sociedad por Acciones Simplificada, S.A.S.)

Introduced to simplify the incorporation process for small sized enterprises, a S.A.S. can be formed by a single shareholder. This type of company is subject to certain limitations, such as caps on annual income and restrictions on shareholders participating in other companies. 

Due to ongoing ambiguities in its regulatory framework and these limitations, this structure is generally not recommended for those looking to expand or integrate with other business activities.

Each type of company in Mexico serves different business needs, and choosing the right structure is critical to ensuring legal compliance and optimal operation. The S.A. de C.V., the S.A.P.I.,  and the S. de R.L. de C.V. provide robust options for businesses looking for flexibility and protection in Mexico. . 

It's advisable to consult with legal experts to fully understand the implications of each structure and to determine the best fit for your business goals.

7 steps to incorporate a company in Mexico

Incorporating a company in Mexico can open doors to a vibrant and growing market. To successfully establish your business, follow these carefully outlined steps, to ensure compliance with Mexican laws and regulations:

1. Choose Your Business Structure

Decision Criteria: Determine the type of legal entity that best suits your business objectives and operational requirements. Whether it’s an S.A. de C.V., S. de R.L. de C.V., or another form, each has specific implications for liability, tax, and administrative burden.

2. Business Name Registration

Application Process: Apply for approval of your desired business name through the Ministry of Economy (Secretaría de Economía). It's advisable to submit 2 or 3 names simultaneously to increase your chances of approval, as this process can vary in duration, typically taking days to weeks.

3. Draft the Articles of Incorporation

Legal Requirements: Prepare the company’s bylaws, which should include details on shareholders, corporate purpose, and governance structure. A Mexican notary public must notarize these documents. This step can be completed in person or through a representative appointed by a power of attorney, which must be translated, notarized, legalized or apostilled, and sent to Mexico.

4. Register with the Public Registry of Commerce (RPC)

Official Registration: Submit the essential documents to the Public Registry of Commerce to officially register your company. This task is generally handled by the public notary who notarizes your incorporation documents.

5. Obtain the RFC (Tax ID)

Tax Registration: Register with the Tax Administration Service (SAT) to obtain your Federal Taxpayer Registry (RFC), which is essential for all business transactions in Mexico. This step requires a Mexican representative with a Mexican Tax ID.

6. Register with the National Registry of Foreign Investments

Foreign Investment Compliance: After obtaining your RFC, register your company with the National Registry of Foreign Investments at the Ministry of Economy. This step also needs a Mexican representative with a Mexican Tax ID.

7. Open a Corporate Bank Account

Financial Setup: Open a corporate bank account to handle your company’s finances. Note that digital signatures are not accepted for this process, which must be conducted in person at the bank.

Additional Requirements

Industry-Specific Compliance: Depending on your business sector, you may need specific permits, licenses, or certifications to operate legally in Mexico. This includes health, safety, and environmental regulations.

Recommendations for proper investment

Investing in Mexico offers substantial opportunities, but it also requires an understanding of local regulations and market conditions to ensure successful business operations. Below are key recommendations to consider:

Foreign Ownership Restrictions

Industry Specifics: In Mexico, certain sectors such as energy, transportation, education, and telecommunications are subject to foreign ownership restrictions. It’s crucial to review these regulations as they can significantly impact the structure and operations of your business in these industries.

Local Representation

Navigating Legal Requirements: The incorporation process and ongoing compliance with Mexican laws can be complex. Employing a local representative or legal advisor is highly advisable to facilitate these processes. 

At BLP Advisors, we offer high-quality and reliable legal services to help you manage Mexican regulations effectively. We also collaborate with partners who can provide comprehensive representation, tax, and accounting services, ensuring that every aspect of your investment is covered.

Compliance

Regulatory Adherence: Staying updated on your tax obligations, labor laws, and corporate governance requirements is crucial. Mexico has specific legal stipulations that must be followed to avoid penalties and ensure smooth business operations. Compliance is not just about adhering to the law; it’s about understanding how these laws affect your business and using this knowledge to make informed decisions that foster long-term success.

Talk to Us

At BLP Advisors, we specialize in assisting foreign companies and startups to meet their legal obligations and thrive within the Mexican market. We offer comprehensive support across various legal domains to ensure your venture in the country is both successful and compliant. Here are some key areas where we can assist you:

• Corporate Law: Navigate the intricacies of corporate governance and compliance.
• Labor Law: Ensure your employment practices are in line with Mexican labor regulations.
• IP & Trademark Law: Protect your intellectual property and maintain your competitive edge.
• Migratory Law: Manage the legalities of your international workforce effectively.
• Venture Capital: Secure funding and manage investor relations under Mexican law.
• Litigation: Defend your interests in potential legal disputes.

BLP Advisors operates uniquely, offering a full legal service for a fixed fee. This approach ensures clarity and predictability in legal expenses as you grow your business. Below are further reasons to choose BLP as your legal partner in Mexico:

• Top-Tier Mexican Law Firm: BLP Advisors is composed of agile lawyers with significant experience and excellent academic credentials, ensuring top-notch legal counsel.
• Personalized Legal Advice: Our innovative approach means we do things differently. We offer comprehensive solutions at an affordable price, understanding the rapid pace at which modern businesses operate.
• Supporting Local and International Clients: With experience handling clients from over ten countries, BLP Advisors is well-versed in the nuances of supporting both local and international businesses.

At BLP Advisors, our lawyers are not only experts in their fields but are also business-oriented and fast-working, providing a founder-friendly and active advisory service. We have years of experience helping companies from around the world successfully conduct business in Mexico.

Do you want legal advice for your business? At BLP Advisors, we have the team to guarantee the success and protection of your business. Visit us and take your business to another level.

FAQs

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

The process to incorporate a company in Mexico typically takes between 4 and 12 weeks. However, depending on various factors —such as the chosen company structure and the completeness of the required documentation—, the process can extend from 30 to 60 days.

What Do the SRL or SA Company Names Mean in Mexico?

"SRL" (Sociedad de Responsabilidad Limitada) and “SA” (Sociedad Anónima) are types of business entities in Mexico where the liability of the partners or shareholders is limited to their contributions to the company's capital. These structures are similar to the Limited Liability Company (LLC) and Corporation in other countries, respectively.

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

While a legal representative is not required to incorporate the company, having one becomes necessary for obtaining a tax ID and opening a bank account. A legal representative can be a Mexican national or a foreign national with a work permit in Mexico. BLP provides comprehensive solutions that include legal, accounting, and tax advisory, with local representation also available through our partners.

What Are the Tax Implications of Incorporating a Business in Mexico?

The corporate income tax rate in Mexico is 30%. Additionally, there is a 10% tax on dividends paid to individuals and a 10% worker’s profit-sharing requirement, which can be deducted from the corporate income tax calculation.

What Documents Are Required to Incorporate a Business in Mexico?

Key documents required for incorporating a business in Mexico include:

• Company Bylaws
• Incorporation deed registered with the Public Registry of Commerce
• Federal Taxpayers Registry (RFC) registration
• Proof of address for the company
• Identification documents of the legal representative
• Bank documents for setting up a corporate account.

How Much Does It Cost to Open a Company in Mexico? 

The cost to open a company in Mexico typically ranges between 2,500 and 6,000 USD, depending on the complexity of the incorporation process and the specific services required.

Starting a business in Mexico represents a significant investment opportunity, bolstered by the country's strategic location, economic resilience, and favorable business environment. The journey of incorporating and running a business in this dynamic market can be both challenging and rewarding.

As foreign investors consider entering the Mexican market, it is imperative to leverage local expertise and seek guidance from experienced professionals.  BLP Advisors offers comprehensive legal services to handle the complexities of Mexican corporate law, labor regulations, and tax obligations.

The successful establishment of a business in Mexico requires more than just understanding the local market—it demands a strategic approach to legal and regulatory compliance, cultural acumen, and a commitment to adapting business practices to local norms and expectations. 

With the right preparation and support, entrepreneurs can effectively capitalize on the opportunities that Mexico has to offer. As the global economy continues to evolve, Mexico remains a promising location for foreign investment and business development, promising a vibrant future for those ready to explore its potential.

This comprehensive approach not only prepares businesses for the initial setup but also equips them with the knowledge and strategies needed for long-term success in Mexico’s promising market.