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A Complete Guide to Starting a Business in Mexico


Table of Content

Factors to Consider When Starting a Business in Mexico
Requirements for Registering a Business in Mexico for Foreigners
Step 1 - Choose the Right Entity Type
Step 2 - Register the Business Name, Trademark, and Other Information
Step 3 - Create the Articles of Incorporation for Your Business
Step 4 - Get a Local Company Tax ID
Step 5 - Open a Bank Account in Mexico
Step 6 - Register with Other Relevant Authorities
Challenges that You Need to Know before Setting up a Business in Mexico
How Long Would It Take to Complete Set up a Company in Mexico?
Takeaway


Mexico is an ideal location for starting a business and achieving success. This is due to the country’s economic stability, strategic geographical location, diverse culture, and abundant resources. The country of 120 million people gives immense opportunities to investors and provides them access to the North and South American markets. Moreover, Mexico has signed trade agreements and treaties with various countries, which means plenty of opportunities are available for people who want to start a business there.

Starting a business in Mexico comes with specific challenges, like any other country. You must understand the labor laws and the structure to establish a new business.

Nevertheless, Mexico is still one of the best places to set up a business with minimal investment quickly. Before starting a company in this country, let's review some of the crucial things you need to consider.
 

Factors to Consider When Starting a Business in Mexico

Mexico is one of the biggest economies in Latin America, and it offers tremendous opportunities to investors. The country ranks on 17th number as the world's largest exporter and has trade ties with various north American countries.

Mexico has an excellent geographical location since its major ports offer access to the Atlantic and Pacific oceans. This way, you can easily import and export goods to other countries in that region. But before you start your business in Mexico, you should consider the following things.


Getting Legal Representation

The most crucial aspect you must consider when starting a business in a foreign country is its legal structure. Different countries have different labor, immigration, business, and other laws. Since learning about all these things might be challenging, you would need to find a legal representative to guide you regarding Mexico's corporate and accounting laws.

These representatives should have an in-depth understanding of the business laws for foreign entities to help you set up your new company in Mexico. Their primary role is to deal with the relevant authorities regarding legal matters and offer you helpful advice for your business.

Entity Type

Another critical aspect to consider when starting a business in Mexico is the entity type. Again, you would require the services of your legal representative since they can help you understand different business structures. The business type is crucial when setting up your company since it determines tax rates, incentives, and other things.

The right entity type will ensure you pay the proper taxes and incentives. Knowing that some entity types must publish their financial statements publicly is essential. You can ask a legal representative with a background in corporate law to find the right entity type for your business in Mexico.


Business Opportunities

Before starting your business in Mexico, you must know about the potential business opportunities. To get a better idea, it would be best to perform extensive research about the sector in which you want to start your business. Most importantly, you need to understand the market dynamics of your business.

This way, you'll know how to survive and expand your business in the Mexican market. It will also help you learn about the potential labor market and other things that can impact your business.


Tax system

Taxation is a vital thing that every company should consider before setting up their business in a different country. You must know about the corporate income and other taxes you must pay.
 

Requirements for Registering a Business in Mexico for Foreigners


1. Getting a POA

You do not need any Mexican residency or citizenship to open your own business in the country. If you don’t plan to travel to Mexico frequently, you would need to send the legal representative of your choice a signed and apostilled (to make it valid internationally) power of attorney (POA), so your representative handles all the matters regarding your business on your behalf. 


2. Create Company bylaws

Your company bylaws are a document that will describe your business purpose and how it will function. Please note that these statutes must be legalized before a notary public. These bylaws will specify the powers of shareholders or individuals in the company. They will also establish a transparent hierarchy model for the directors and management for decision-making.

A public limited company must file its financial statements with the National Banking and Securities Commission and other authorities. If you set up a private entity, publishing your financial statements will not be required legally. Let’s go over the step-by-step process of starting a company in Mexico.
 

Step 1 - Choose the Right Entity Type

Firstly, you must choose the right entity type before starting your business in Mexico. The entity type determines the company's operations, finances, taxes, etc. The Mexican government has different options for starting a business in Mexico for foreign companies:


A natural person with business activity (individual company)

It refers to foreign natural persons who wish to develop an economic activity independently, such as restaurants or consultants.


Branches

Anyone looking to set up a branch of their existing brand in Mexico should get approval from the National Commission of Foreign Investments and the Secretariat of Foreign Affairs. Once the applicants get the approval, they can run their business operations. Opening a branch in Mexico will only give you a limited presence.


Representation Office

The representation office is an entity type that allows businesses to have a presence in Mexico to provide information or disseminate their products without carrying out acts of commerce. International companies must research the Mexican market before diving entirely into it.


New Mexican Society

Different types of commercial companies can be registered in Mexico, and the most common are the Limited Liability Company and the Simplified Stock Company.


1. Stock Corporation (Sociedad Anónima de Capital Variable)

This is the most common structure among all companies in Mexico. When you form a stock company, its ‘value’ is divided into shares. Typically, the creditors protect these shares.


2. Limited Liability Company (LLC)

Most companies starting their operations in Mexico go for the LLC business entity. Choosing this entity type allows you to start your business with minimal requirements and gives you the option of limited partners.


3. Simplified Stock Company

The formation process for this company is cheaper and faster than SC and LLC. It has a simple corporate structure, ideal for SMEs looking for an easy client-provider route.
 

Step 2 - Register the Business Name, Trademark, and Other Information

After deciding the relevant entity type for your company, you must register your business's name and trademark.

Before you go for trademark registration in Mexico, you will require certain documents and information. Here is a list of them:

  • The design or the logo that you want to trademark (only applicable in a few instances)

  • Company's name and the applicant's name and citizenship

  • The complete physical address. Don't provide a post office box address

  • The list of goods and services that you will use the registered trademark for

  • The date of the trademark's usage in Mexico, along with relevant documents to support your claim

  • A copy of the business's bylaws and the Articles of the Constitution

  • Payment for the charges (The fees will vary depending on various factors)

Once you submit all these documents and go through the entire process, the relevant department will proceed with your trademark registration. Getting a trademark registration in Mexico can take 9 to 10 months. It is also worth keeping in mind that you will need to file for renewal ten years after the issuance date.
 




Step 3 - Create the Articles of Incorporation for Your Business

The Articles of Incorporation is also an essential element that you need to create when registering and setting up your business in Mexico. You would need to include the following things in your Articles of Incorporation:

  • Business entity and structure

  • Company name

  • Company's bylaws

  • Mission and vision statement

  • Names of the shareholders or people in the upper management

  • Physical address

  • The corporate purpose

The supporting documents that you submit need to have an apostille certification. You will also have to translate the documents if they are in a language other than Spanish.
 

Step 4 - Get a Local Company Tax ID

Taxes are one of the most important things you must remember when starting a business. Whether expanding your business or starting a new one in a different country, knowing about the taxation system is a must. Many countries will only let you operate once you get a tax ID.

The case is no different for Mexico, requiring you to get a tax ID before starting your business. With a tax ID number, you can open a bank account, employ people, or operate your business throughout Mexico.

You can get the 12-digit company tax ID, the Registro Federal de Contribuyentes (RFC). The RFC comprises both alphabets and numbers. Though you don't have to be a resident of Mexico to obtain an RFC, you will have to provide a fiscal address with proof.

Furthermore, you'll need to submit relevant documents and proof to show that the company is incorporated in Mexico. Check out the Mexican treasury website to learn about the documents you need to obtain an RFC. 

 

Step 5 - Open a Bank Account in Mexico

The companies operating in Mexico must have a business bank account to perform the relevant transactions.

These bank accounts are also necessary for paying taxes to the government. Therefore, you should create a bank account as soon as you get your local company tax ID.

The bank would ask for your tax ID and other relevant documents to open the business bank account.

Documents will vary from bank to bank since every institution will have different requirements. Opening a business bank account can take a few weeks, so you must start with it as soon as possible.

Also, you should check with the relevant bank for the documents they need to open your account. Usually, most institutes will require the following documentation to open your business bank account:

  • Proof of the company's address

  • Information about the shareholders/partners

  • Copy of the company's Articles of Incorporation

  • Official ID and a valid passport

  • Visa detail, if applicable

  • ​Company tax ID number

You will need to deposit a minimum amount in your business account to open the bank account. The amount will depend on the bank you choose.
 

Step 6 - Register with Other Relevant Authorities

Once you get the local tax ID, you must register with other relevant authorities to hire workers and conduct your day-to-day operations in Mexico. These registrations are a vital aspect of setting up your business in Mexico. Let's go over them in more detail.


Register with the IMSS and the INFONAVIT

Employers in Mexico must register their company with the social security program before hiring employees. The employers need to make contributions to the Mexican Institute of Social Security (IMSS), which will give them coverage for the following: 

  • Accident Compensation

  • Disability pension

  • Employee medical services

  • Maternity leave

  • Severance Pay

  • ​And other essential things

In addition to the IMSS, the employer must contribute 5% of the employee's basic salary to the National Worker's Housing Fund. The INFONAVIT (Instituto del Fondo Nacional de la Vivienda para Los Trabajadores) uses the fund to provide housing assistance to the employees.


Register with the SIEM

Registering your business with the National Business Information Registry (SIEM) is necessary to run your operations in Mexico.


Register with Foreign Investment Registry

If the company's owner is a foreign national and does not hold a permanent residency in Mexico, they would have to register their business with the Foreign Investment Registry. The company's owner would have to make a personal appearance to complete this process.

Remember that company's owner should make the appearance within 40 days of the company's incorporation. The appearing personnel should also be present in the Deed of Incorporation as a POA.



Challenges that You Need to Know before Setting up a Business in Mexico

Before setting up your business in Mexico, you need to know the challenges you can face. Sure, there might be some difficulties that you will encounter when setting up a business in Mexico. Still, they should continue investing and starting their business in this wonderful country.

You can have a clear plan to deal with these challenges by getting prior knowledge to ensure you can tackle them when setting up your business in Mexico. We will discuss the challenges you can face when registering your company and hiring employees.
 

Challenges That You Might Face When Registering a Company

Here are some challenges you must plan for when registering your company in Mexico.


Complex Tax System

Mexico’s slightly tricky tax system can challenge individuals looking to set up their business there. Businesses will have to make around six tax payments within the financial year. You will also need to pay some state and municipal taxes.

Dealing with the complex tax system can be a challenge for various companies as they would have to keep track of different taxes they would have to pay. This can be a massive challenge when setting up your business in Mexico.


Time-consuming Process for Property Registration

Property registration in Mexico is also quite time-consuming and can cost you significant money. You need to get a permit to build an extension or renovate your current property.

You may also need to wait for around 3 to 4 weeks, considering you have fulfilled all the requirements for the permit. If there is something missing, you might have to wait for some extra time to get your permit.


Laws and Regulations

Different states in Mexico will have different laws and regulations for business. The states would have different tax, licensing, and labor laws that can impact the business's revenue.

Therefore, it would be best to go through the laws of different states to choose the right one for your business. Businesses must abide by the state laws they are operating in. Otherwise, they would be subject to fines and penalties.
 

Challenges That You Might Face When Hiring Employees

Whether you hire local or overseas workers, you will encounter some issues.​


Labor Unions

The Mexican government recognizes labor unions to protect employee’s rights. These labor unions can go on strikes and stop working if their demands are not fulfilled. Therefore, you might legal advice to help assist you with employees contract management.


Cultural differences

Another critical element is the cultural differences that foreign companies might face. They would have to understand better the different traditions, languages, customs, and other things.


Immigration Options

Mexico is one country that easily allows people from different countries to find employment. However, it has some challenging immigration options that are difficult to understand. Companies might find themselves in a pickle when deciding on the appropriate immigration options to get the needed talent.


How Long Would It Take to Complete Set up a Company in Mexico?

The entire process of establishing a new company in Mexico can take around 60 to 90 days. It is the average timeframe for most companies that follow the steps and meet all the requirements for company formation in Mexico. You can also hire a legal representative to speed up the process.

The entity type you choose will determine the timeframe it will take to set up your company. It is important to remember that you must have all the documents necessary to form a company in Mexico to ensure you don’t have to wait too long to register your company in the country.
 

What Can Businesses Expect in terms of Country Volatility?

Businesses want to operate in an environment that is less volatile economically and politically. Mexico is the second-largest economy in Latin America and has seen rapid growth in the last few decades. So, if you want to target the North and South American markets, then Mexico would be an ideal choice.

Many economic experts have a positive outlook for the Mexican economy in the coming years. The Mexican economy has been booming for the past few years, and sectors like retail, manufacturing, IT, etc., are experiencing rapid growth.

However, political uncertainty still seems to be a significant problem for Mexico as the country continues to see frequent changes. Political instability can harm the overall business environment since there would be no clear policy. As a result, businesses won't have a feasible environment to sustain in the long run.
 

Takeaway

Hopefully, you now clearly understand setting up and establishing your business in Mexico. The details in this article cover the main points that investors and entrepreneurs need to keep in mind for the Mexican market to ensure they can operate their businesses without trouble.

The larger consumer market and the flourishing economy make Mexico one of the best places to start your business. This country’s massive infrastructure can help you grow your business quickly. The best part is that the country has exceptional trade deals and agreements with Latin American countries.

Most importantly, easy access to the Canadian and US markets makes Mexico one of the best places to start a business, as plenty of lucrative opportunities are available.