Setting up a corporation in Mexico

Which Corporation will Best Suit Your Needs?

In Mexico, the two major types of companies are called the Sociedad  Anónima and the Sociedad de Responsabilidad Limitada. They are basically the equivalent of a Corporation and a Limited Liability Company in the United States. There are other company forms such as the Sociedad Civil, which is similar to a professional partnership that your doctor or lawyer might have for his or her office. There is also the Asociación Civil, which can be compared to a non-profit company.

In choosing the best type of Mexican Corporation, we need to take into consideration how many shareholders there will be, the flexibility desired in managing the company and the level of formality required.

For a small business like a restaurant, store or small-scale manufacturing operation, You may opt for a Sociedad de Responsabilidad Limitada.

For a large-scale manufacturing operation or a business with more than, let’s say 5 investors we recommend a Sociedad  Anónima.

In either case, a Sociedad de Anónima offers certain legal protections for shareholders that are not necessarily available with other corporate forms.

For both the S.A. and the S. de R.L. the option of variable capital (capital variable) can be established, thus permitting the increase or decrease of capital with minimized formalities.

Basic Characteristics of Mexican Corporations

Sociedad Anonima.

• The minimum capital is established by the shareholders.
• Minimum 2 shareholders.
• Must be managed by either a Board of Directors or an Administrator.
• Supreme authority over the corporation is exercised via General Shareholders’ meetings.
• General Shareholders’ meetings must be convened by law annually and may be either extraordinary (whenever called) or ordinary (held annually).
• Obligatory Auditor or Auditing Board to act on behalf of shareholders.
• Shareholders’ liability is limited to their capital investment.
• Company may issue different classes of stock.
• Each share is entitled to one vote.

Sociedad de Responsabilidad Limitada

• The minimum capital stock is established by the shareholders.
• Minimum 2 and maximum 50 shareholders.
• Must be managed by either a Board of Directors or an Administrator.
• Supreme authority over the corporation is exercised via General Shareholders’ meetings.
• General Shareholders’ meetings are obligatory and may be either extraordinary (whenever called) or ordinary (held annually).
• Optional Auditor or Auditing Board to act on behalf of shareholders.
• Shareholders’ liability is limited to their capital investment.
• Company may not issue different classes of stock.
• Company may however offer “privileges” to certain specific stockholders in terms of voting rights.
• Pass-through entity status for US taxpayers.

What are the Benefits of Forming a Corporation in Mexico?

• Buying land in restricted zones, beachfront for example
• No need for a bank trust
• Developing property for construction of condominiums or other real estate
• Purchasing a hotel
• Operating a business
• Obtaining work visas
• Tax benefits and deductions
• Absolute control over your investment

How to Get Started

Consult an International law firm in Mexico, they will obtain a reservation and permission for the name of the corporation and register the notification of use; Once they have collected all the relevant  information for its incorporation; the attorney will contact and review the Notary’s work for the constitution of  your corporation; obtaining its registration on the Public Registry; attendance and opening of a bank account for your corporation and obtaining the RFC (this is a federal taxpayer registration).

These steps are taken to ensure that your company will be legally incorporated and ready to use in Mexico.  Please note that the incorporation fees are fixed by tariff and payable by us to the Notary Public.

You can expect to pay approximately $2,100 USD plus 16% IVA tax to set up your corporation.

There are a couple payment options to get started, PayPal, or a transfer of funds to a Trust account.

In order to start with the incorporation process, your attorney will require that you provide four names to choose from, for your corporation indicating your preference as first, second and third preference.

You should note that Mexican Corporations require a minimum of two shareholders and they can hold the percentage that you chose.  A shareholder can also be another corporation controlled by you.  If that is your choice, consult with your attorney for further instructions on how to proceed.

You will be asked to provide the following information for each shareholder and directors:

• Full name:
• Nationality:
• Marital status:
• Place of birth:
• Date of birth:
• Current address:
• Occupation:
• Percentage of participation in the share capital of the company:
• Will this person be a director?
• Provide a scanned copy of their passport.
• Once you are in Mexico, you will provide  a copy of the Tourist Visa issued on arrival.

Bylaws and Articles of Incorporation

All Mexican companies must have bylaws and articles of incorporation. The bylaws determine the individual powers of the officers and directors. The bylaws also provide an outline of internal day-to-day decision making of the company. The bylaws will determine what powers each director or officer may exercise, for instance, who may open bank accounts versus selling property. Also, the power to represent the company in legal actions or file the company’s taxes.

International Power of Attorney

The International power of attorney (POA), is specially designed for businesses in Mexico, that allows an attorney to act on your behalf without stepping foot in Mexico. No flights, no visas, no complications.

Once the deeds of the by-laws of your corporation are ready to be signed, the attorney will require a power of attorney (POA) to avoid travel expenses to sign the related documents.

The POA must be legalized in order to be officially accepted and recognized in Mexico.  In order to be legalized, the POA must be previously authenticated (certified) by the proper authorities. Once the POA is authenticated, the next step is to sign the Bylaws of the Corporation on the shareholder’s behalf.

Timing of Forming a Mexican Corporation

In most cases it takes 3-5 weeks from the time the required paperwork is received from the client.

The deed enters Public Registry, and it is ready in 2 to 3 weeks. In the meantime, the Public Notary provides a certified copy of the by-laws and the RFC (tax number). With these last documents, the Director of the Corporation is able to open a bank account in Mexico, which may be in USD or Mexican Pesos.