Do We Have To Register Businesses In Each State In Mexico

Mexico Entity Formation_header image

These are interesting times economically for United mexican states, making it an equally interesting fourth dimension to form a business concern there. However, if you're willing to atmospheric condition a piddling uncertainty, it's a bang-up time to do so.

The Benefits and Risks of Forming a Mexican Business organization Now

In October 2021, the International Monetary Fund (International monetary fund) cited the Mexican economy as "rebounding from its deepest downturn in decades [and] set to grow by 6.2 per centum in 2021 and 4 percent in 2022." ^[one]. The demand for domestic services has gone up and the current administration remains committed to reducing bureaucratic spending in favor of increased social spending and infrastructure projects. Furthermore, the amended United States-United mexican states-Canada Understanding provided a boost to investors seeking a deeper economical alliance in the region^[ii].

The Mexican economy is rebounding from its deepest downturn in decades [and is] set to grow by 6.2% in 2021 and 4% in 2022.

There are, of course, points of business concern, such as depression productivity growth, corruption, and poverty. PEMEX (Petroleos Mexicanos) has been negatively affected past the decline in oil product and prices, resulting in a significant increase in debt. Recent reforms accept loosened restrictions for foreign investors of certain sectors like retail fuel sales, but the current administration has adopted an arroyo that continues to favor PEMEX over private parties. According to Transparency International, United mexican states ranks 124 out of 180 on the Corruption Perceptions Index for twelvemonth 2020.

Finally, COVID-19 had a devastating effect on Mexico as it contributed to about one-half a one thousand thousand deaths, increased unemployment, and already high levels of poverty have skyrocketed.

If your entity needs to expand to Mexico, the procedure for formations is known and proven --- although there are some requirements that are unexpected to those who take but formed entities in the U.Southward.

Mexican Entity Types and Their Requirements

The 2 most pop entity types in Mexico are the Corporations (Sociedad Anonima or "Due south.A") and the Limited Liability Company (Sociedad de Responsabilidad Limitada or "S. De R.L."). But at that place is a third type of entity that is gaining popularity: the "South.A.P.I." -- Sociedad Anónima Promotora de Inversion (Mexican investment promotion company).

The corporation (S.A.) and express liability company (S. De R.50.) accept similar features and requirements, which include:

Express liability
A resident Mexican legal representative
Mandatory shareholder annual meetings
A domestic address
Required tax return and financial argument filings
A minimum of ane director/managing director and a minimum of two stockholders/partners (the Due south.De R.L has a maximum of 50 while the S.A has no minimum).

The minimum capital amount is 50,000 Mexican pesos for the S.A., and for the Due south De R.50., it cannot be less than 3,000 Mexican pesos. Just the S.A. may have multiple share classes and special shares for employee stock options.

The S.A.P.I. is a special investment corporation like to the S.A. only with more robust minority shareholders' rights and tax advantages. It is usually used in real estate and capital letter-intensive projects.

Another type of company worth mentioning is the Sociedad Acciones Simplificadas (S.A.S.) This type of company can be registered online, all the same, information technology is geared to the domestic entrepreneur (the owner needs to have a Mexican Resident tax I.D.).

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How to Class an Entity in Mexico

Once the desired entity type for the foreign owned entity is identified, the process for germination includes obtaining approval for the proper noun from the Ministry of Foreign Affairs, providing an international ability of attorney (duly notarized and apostilled) to the resident legal representative, drafting the Articles of Association and by-laws and executing the Articles before a notary in Mexico (if qualified, the Mexican resident legal representative can do this). One time the Articles are signed and notarized, you have your Mexican entity!

With your company established, it is time to register!All companies with strange investors must annals at the Registry of Foreign Investment within 40 working days.

Similarly,the company is required to obtain a tax identification number, a digital signature and a digital symbol within 30 days of formation.

There are other possible registrations after the company is formed, including the Public Registry of Commerce, the Social Security Institute and the National Business Information Registry.

Once your company is formed and has a Tax I.D., monthly tax filing obligations arise. The Mexican tax authority, the Sabbatum (South istema de Administración Tributaria) , requires all legal entities to submit revenue enhancement filings on a monthly basis even if the company has not initiated business operations, ha s no transactions, and isn't operating.

Mexican taxation constabulary is amongst the near complicated in the globe and a Mexican auditor must oversee accounting operations in Mexico – it's frequently assumed that a company's accounting & finance department in the dwelling country tin can make all required taxation filings in Mexico, merely this is not the case.

Are Yous Ready to "Accept the Plunge"?

The economic outlook in Mexico is positive, just not without risks. Depending on what business you're in, you may determine that the potential rewards of doing business in Mexico outweigh the risks. If/when you decide to "take the plunge", you'll find that the germination process is relatively hurting-free, although there are some additional hoops to jump through (vs. forming in the U.S.). Are y'all ready to start doing business in Mexico?

[1] International Budgetary Fund; Staff Concluding Statement of the 2021 Article Iv Mission, Oct viii, 2021
[2] U.Due south. Department of State; 2021 Investment Climate Statements; United mexican states, July 21, 2021

This content is provided for informational purposes merely and should non be considered, or relied upon, as legal or tax advice.

Topics: International Corporate Services