It is crucial that investors are aware of and comprehend the six essential steps to business formation in Mexico for them to be able to start commercial activity successfully inside Mexico. Mexican economy.
Mexico is often cited as having the potential as a potential top ten economy around the globe in the coming decade. In recent years, Mexico has become an increasing low-risk high growth and high growth economy that offers an appealing business environment. This is due to the consistent growth in GDP, a weak pesos, a growing middle classes, as well as a rise in safety and security. These have led to the growth of domestic businesses, while simultaneously attracted foreign investment. In June Mexico’s FDI recorded a record-breaking surplus that was USD5.1 billion.
These elements are the reason for a rise in foreign investment by investors who are interested in conducting trade in Mexico. The most significant problem is that many foreign investors aren’t sure where to start. Learn about the procedure to establish a company in Mexico to efficiently and effectively begin commercial activities within Mexico.
Do I need a legal Representative to establish a company in Mexico?
Mexican law stipulates that foreign investors appoint an attorney for the company’s formation in Mexico.
An Legal Representative a person who is either an Mexican citizen or a foreign national legally authorized to reside in Mexico and who represents and perform on behalf of the business. They also are responsible for communication between private and public organizations. This is long and difficult due to the specific requirements that are involved. It is highly recommended that you have an authorized representation in Mexico to work on your behalf in order to set up your business with ease.
Six essential steps on how to start a business in Mexico
1. Decide what Mexican Legal Entity to use
One of the most important aspects of forming a company is to create an entity that is legally legal. The majority of investors decide to form an stock corporation that is a non-profit corporation which means that each shareholder holds a portion of the corporation through stocks.
The process is long and complex due to the rules that are involved. It is strongly recommended to hire an attorney in Mexico to work on your behalf in order to set up your business with efficiency.
The two major corporations are Sociedad anonima (SA) as well as Sociedad de Responsabilidad Limitada (S de RL) also which is known by English by the names of Corporation and Limited Liability Company (LLC). Some of the major differences between the two legal entities are:
SA requirements are intended to help large companies, while S de RL is designed specifically for small and medium-sized companies.
SA shareholders are liable for the amount they invested and personal assets. S De RL partners will only be accountable for the value of shares they put into.
SA can have unlimitable number of shareholders. S de RL is limited to 50 partners. Both stock companies are limited to 2 investors or owners.
2. Select a company name
The search for a business name is a challenging and time-consuming process since the company name you’re looking for might not be accessible in Mexico.
It is therefore important to come up with three to four business names and to select it as the preferred prior to submitting it to Ministry of Economy. Ministry of Economy.
If you are planning to translate your company names directly to Spanish then speak with a native Spanish speaker to ensure that the Spanish Business Name is properly read and is appropriate for your business.
3. Make the by-laws of the company
The creation of company bylaws is an important role in the process of the formation of a company in Mexico. The by-laws will identify who in the company is empowered to take legal decisions for the company. It could also contain the details of day-to-day decisions of the company. The owners will draft and create bylaws detailing the commercial operations of the business.
It is standard that foreign investment firms sign an Power of Attorney (POA) in Mexico to serve on behalf of the business to make these decision-making processes. A POA can be a protection for foreign investors, knowing they have a competent local expert in their place. This can help prevent any issues in the implementation of the by-laws.
When the by-laws have been completed after which the POA which has been granted the authority to sign the bylaws, will sign the bylaws on behalf of every shareholder. The Public Notary is required to be a witness in this. Once this is completed the Public Registry of Commerce will require the receipt of the company’s by-laws.
4. Finding an address for fiscal purposes
It’s a legal requirement that your business to have an address for its fiscal affairs in Mexico. This business will have to have a registration with Servicio de Administracion Tributaria (SAT), also known as in the US as the Internal Revenue Service (IRS).
For all business correspondence, including tax and mailing the address is utilized.
5. The process of obtaining an Tax Identification
The newly-formed firm will require an tax ID to do trade in Mexico. Tax IDs can be obtained through an Mexican resident or citizen. If this isn’t possible, then, you can appoint an POA from the company’s bylaws can get an tax identification number on behalf of the company’s behalf. The individual must submit the tax authority with the certificate of incorporation.
It’s essential to have a tax ID during company registration in Mexico since you will not be able to start your business without one.
6. Establishing an account for a company bank
The process for opening an account at a corporate bank is dependent on the bank’s policies. In general, you’ll have to present your Act of Incorporation and company bylaws to the bank.
It is essential to make sure that you have the legal representative who was given the power to open and manage an account for a company bank account in order to manage this process on behalf of you.
After the documents have been examined by the bank, the legal representative needs to provide a photo ID, their tax ID of the company, as well as Proof of Fiscal Situation which is a document that shows that the tax ID is in use. The bank will review your application to establish an account for corporate banks.
It is vital to know that the bank could require authorized representatives to agree on the Anti-Money Laundering legal document in order to block any unlawful activities that are committed by an organization by monitoring the transactions of financial transactions.
How is the time frame to fully incorporate your company in Mexico
The process of forming a company is between two and three months, dependent on whether the company procedure is followed properly as well as the representative of legal is an expert local to the area.
The process of creating a company in Mexico is often overwhelming and nerve-wracking for investors. However, there are skilled and skilled local legal professionals who can help foreign businesses in incorporating successfully and work in total conformity to local law.
