Often expats ask me how to form a new business in Mexico. Today, I’m going to take you through the steps required by Mexican law to get your new business up and going.
For many reasons, a sole proprietorship will not always be the best option for you when forming a new business in Mexico. Often expats look to form a Company, a Limited Liability Corporation, known as an LLC in other countries. In Mexico if you wish to form a legal entity there are a few options.
Until recently there was a requirement you had to have two people, but now Mexico has what is called Unipersonal Corporations. They can be formed without the need of a notario but you would need to have your electronic signature from the tax authority, SAT, and have your name chosen.
If you have both, you can do the company formation on the website of the Secretary of Economy for free and then choose who will do follow up items.
If you need to form a regular entity the traditional way due to specific needs or you do not have the electronic signature from SAT, then you need to follow these nine steps:
Step One: Choose a company name
Obtain authorization from the Department for Trade (Secretaria de Economía) for the company name to be used. This can either be done online or via a Notary Public (Notario Público) who can fill out the forms and get the company name. Normally, five names are submitted in the order of preference you want.
Step Two: Draw up the Deed of Incorporation
Choose a Notary Public to draw up the deed for the business entity. For certain business entities, a Corredor Público – a class of attorney between regular attorneys and notaries – can do the formation of certain business entities. You can have a regular corporation – a Sociedad Anónima de Capital Variable – or an S.A. de C.V., a regular general corporation or company. A Sociedad de Responsabilidad Limitada, S. de R.L. is like an LLC), a Sociedad Civil, S.C. is like an LLP or PC for professionals and an Asociación Civil, A.C. is like a nonprofit. There also are some more sophisticated entity forms for investments and investors, such as Sociedad Anónimas Promotoras de Inversión, SAPI.
You should be aware that the notary also could be chosen at the beginning of the start-up process to obtain authorization for the company name.
Step Three: Sign the Deed of Incorporation
The Deed of Incorporation must be signed in the presence of the Notary. For this the following are required:
- The presence of all owners (socios) of the entity mentioned in the Deed (the Deed will also specify the shareholdings of each owner).
- Identification documents of each owner. For Mexican citizens, any form of official ID is sufficient (for example passport, Elector’s Card (IFE), Cédula Profesional). For foreigners, passports and proof of legal presence in the country. For example, a temporary or permanent residence permit or a tourist visa is required.
- CURP (like a social security number) number and RFC number (tax ID) for those that have them.
- Proof of address (Comprobante de Domicilio) of each of the owners (usually a utility bill not more than three months old).
Besides figuring out how many shares each partner will have, you will also need to know the names of whomever you will give power of attorney to, such as attorneys and accountants who will represent you in day-to-day operations with the tax or other authorities, or for later representation in litigation. This is done to avoid the need to personally appear at various government offices.
Step Four: Register the business address
Obtain a registered address (Domicilio Fiscal) for the company where you can receive notifications in the event a government agency needs something from you.
Step Five: Registration for tax purposes
Register the business for tax purposes with the Mexican Tax Authorities (SAT). This can be done at any local office of SAT after preregistration is done online. You can make an appointment for the final visit or get in line early in the morning. SAT will want you to bring many of the same original documents you gave to your notary as well as a notary certified copy of the deed pending registration and a letter from the notary stating the deed registration is in process.
Step Six: Businesses open to the public
If your business is open to the public (involving shopping or any activity), you will need to notify the Local Government (Municipio) of the opening of the business and obtain a municipal business license, and any state or federal licenses that may apply due to the specific types of business activities.
Step Seven: Registering employees
If your business is planning to hire employees, register the business with the Mexican Social Security Institute (IMSS) and the National Worker´s Housing Fund (INFONAVIT), as well as with your local state tax office. Many tax certain types of business activities and others have a small state payroll tax.
Step Eight: Register with the SIEM
Register your business with the National Business Information Registry (SIEM). This registry is run by the Department of Trade (Secretaría de Economía).
Step Nine: Foreign Investment Registry
If one or more of the owners is a foreign national without permanent residence status, it is also necessary to register the business with the Foreign Investment Registry (Registro Nacional de Inversión Extranjera).
This must be done in person within 40 working days of incorporation of the business by someone designated in the Deed as having power of attorney (poder).
A form must be filled in and submitted along with a copy of the Deed and the identification documents of the person doing the registration.
You will also have to do quarterly filings as long as you have foreigners who are not permanent residents but own part of the company.