As a result of its favorable conditions and diverse range of industries, Mexico has become a popular destination for business owners and investors looking to launch companies. With a strategic location, a skilled workforce, and a favorable business environment, Mexico offers numerous advantages for organizations across various sectors.
One way to enter this thriving marketplace is by forming shelf companies in Mexico. The government has implemented pro-business policies, such as tax incentives and streamlined regulations, encouraging foreign investment.
Let’s dive into why shelf companies in Mexico are an excellent option for business owners and the alternatives including the legal requirements to start a business in Mexico.
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What is a shelf company?
A shelf company refers to a registered company that has never engaged in any business activities, possessing neither assets nor liabilities. It exists only on paper, patiently awaiting an acquisition by a buyer. In the past, purchasing a shelf company was the preferred method for swiftly obtaining a company without enduring the time-consuming process of registering a new one.
However, the landscape has changed, and registering a company has become significantly faster and more cost-effective than acquiring and modifying a shelf company.
How to buy shelf companies in Mexico
Investors in Mexico must complete several steps and undergo a verification process before acquiring shelf companies.
Acquiring a ready-made company in Mexico involves a series of steps and verification procedures to obtain the legal entity. This process primarily entails purchasing the equity stock from the current owners. Buyers will sign a purchase/sale agreement to initiate this transaction.
Upon completion, the current owners will transfer corporate control to the buyer through a shareholders’ meeting, formally recognizing them as the new owner. Additional steps may include changing the company’s name and address, modifying its purpose, and replacing the Board of Directors.
Benefits of shelf companies in Mexico
- Instant Registration
- Enhanced Loan Accessibility
- Established Track Record
Here are three key advantages of purchasing shelf companies in Mexico.
1 – Instant Registration: Mexico’s ready-made companies are pre-established entities with a clean history and no outstanding debts. They can be acquired immediately, allowing buyers to commence business activities within just 24 hours of placing an order.
2 – Enhanced Loan Accessibility: Shelf companies facilitate easier access to bank loans for investment purposes. Due to their established status, these companies convey a sense of longevity and credibility, making them more attractive to financial institutions. Additionally, owners are relieved from the administrative burden of obtaining a tax identification number and opening a bank account for the company.
3 – Established Track Record: As shelf companies have spent time “on the shelf,” they benefit from an aged corporation status. This implies that the legal entity carries no bad debts or negative credit history, providing a solid foundation for future business endeavors.
Disadvantages of shelf companies in Mexico
- Liabilities Transfer
- Share Transfer Process
- Potential for Fraud
Let’s examine some of the biggest risk factors involved in buying shelf companies in Mexico.
1 – Liabilities Transfer: When purchasing a shelf company, be aware that its existing and future debts will pass on to you as the new owner. As a result, obtaining a new loan may be complicated, as previous loans must be settled. Banks closely scrutinize the financial history and creditworthiness of companies before granting loans. However, shelf companies have minimal trade, tax, and income records, making it difficult to assess their creditworthiness.
2 – Share Transfer Process: Depending on company regulations, firms can undergo periodic reviews and require changes in ownership. While some of these transactions may go unnoticed, they can surface in the future, causing complications. For this reason, it is necessary to engage in the process of selling the shares of the old company. If any tax or revenue-related discrepancies arise from the previous shareholders, the current owners will be held accountable and required to settle the liabilities. The former partners and team members will be unaffected as the company has been transferred to new management, who assume responsibility for any tax or scam-related consequences associated with acquiring a shelf company.
3 – Potential for Fraud: Caution is advised when purchasing shelf companies due to the presence of scams. There is a risk of paying a substantial amount for a company that may not hold its claimed value. When buying a shelf corporation, you must exercise caution and make sure the seller is trustworthy.
To avoid these risks, we recommend partnering with a local expert in acquiring Mexican shelf companies.
Biz Latin Hub can help you form shelf companies in Mexico
Biz Latin Hub is an excellent partner for companies looking to enter the Mexican market. With our extensive presence in Mexico, we boast a team of proficient bilingual corporate support specialists, ready to provide tailored solutions for your needs.
The range of services we offer includes company formation, accounting and taxation, legal support, hiring, and PEO services. If you are considering doing business in Mexico, Biz Latin Hub is an ideal partner for you.
Our experts have the expertise and resources to support your business throughout Latin America. To discover more about our comprehensive services and how we can contribute to your success, reach out to our team of specialists today.
If you found this article about accounting firms in Mexico interesting, be sure to explore the rest of our coverage of the region. Additionally, you can learn more about our team and expert authors here.
The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.