Why incorporate a business in Mexico? What does the business incorporation process involve? How long does the process take? How can a company obtain its local tax ID? What commercial benefits does the region bring? These are questions that come up commonly for companies considering establishing a commercial presence in Mexico.
Mexico is the northernmost Latin American nation and is home to nearly 130 million habitants. Mexico has a market as large as Western Europe and has one of the most open global economies, with 11 free trade agreements covering 44 countries. Mexico presents exciting commercial opportunities for companies looking to expand their operations. As such, the true potential of Mexico should not be underrated.
Keep reading and learn about the key aspects in the business incorporation and bank account opening process.
Process for Company Formation with Bank Account in Mexico
Once companies have discovered a market opportunity, and are ready to penetrate this market and begin operations, they will need the right entry strategy. For most corporations, the incorporation of a local company is the ideal method to begin business operations. The Stock Corporation, or S.A. de C.V (Sociedad Anónima de Capital Variable), is the most common business structure used by foreigners looking to launch operations in the region.
Once the company structure has been decided, it is necessary to make a reservation and formally ask authorization for the business name before the Economy Ministry. This activity is usually performed by the Public Notary. It is also the Public Notary who is in charge of giving notice to the Mexican Tax Authority, called the ‘Servicio de Administración Tributaria‘ (SAT) that the company will be beginning operations. This registration will allow the company to obtain an ‘RFC’, the local tax ID. It is worth noting that completing the business incorporation process before Public Notary is mandatory. There are additional requirements, which is why many businesses choose to work with a local partner to ensure the business incorporation is performed correctly.
Additionally, some other elements that must be considered during the business incorporation processes include:
- Shareholder Information: Name, nationality, and address of the shareholders – either legal or natural persons. Also, it is important to remark that Mexican companies require two shareholders as a minimum.
- Corporate Purpose: It is recommended to identify the business activities that the company will undertake.
- Share Capital Structure: The company must subscribe the company share capital and identify the percentage of participation of each of the shareholders.
- Company Address: Where the company will be domiciled in Mexico.
- Administration of the Company: Who will be the company legal representative, and who and how the company will be administered.
- Profit Distribution: This will explain how profits will be distributed among the shareholders.
All these elements will form the basis of the company bylaws and will confirm the internal day to day decisions, operations, and activities of the company.
Finally, it will be necessary to complete the registration before the ‘Instituto Mexicano del Seguro Social‘, and all other registrations before various governmental agencies according to the commercial activities of the company
New Company – Bank Account Opening Process in Mexico.
The process of opening a bank account in Mexico will depend on each bank’s policy. But in a general, the bank will consider the Company Incorporation Act and bylaws. This documentation must include the names of the persons with the power to open bank accounts, who is generally the company legal representative. Additionally, the company will need to prove its registration before SAT and show the company tax ID (RFC). Without these, the bank will not authorize the opening of the corporate bank account.
If the person who will open the bank account is not a Mexican national, the bank will often require them to go physically to the branch and sign all required legal documentation in addition to proving their identity. These legal documents will allow the company and the bank to establish who will have access to the accounts and who is permitted to make commercial transactions.
Also, many Mexican banks required additional signatures and documentation relating to money laundering. This includes providing certain information such as taxpayer identification numbers for foreign shareholders, invoicing information or corporate organizational structures. These measures have been put in place by most banks in Mexico as a way to stifle commercial transactions based on illegal activity.
Once you have opened a corporate bank account, then you will be ready to begin operations.
Next Steps in Your Mexican Business Expansion.
The Mexican government remains committed to making the national business environment both attractive and accessible for foreign businesses interested in expanding their operations abroad. The Latin American region offers investors a lot, and each country has exciting business opportunities. However, Mexico remains a leader for a number of reasons, including the following:
- Having an open-market economy
- Being part of numerous strategic regional trade agreements
- Having similar time zones to the North America markets
- Possessing a low-cost and educated labor force
- Mexico is estimated to be the 7th largest global power in the world by 2050
- The region is home to blossoming national sectors, including the automotive, fintech and manufacturing sectors
The process to incorporate a business in Mexico can provide companies with access to large consumer markets, a great way to add to their revenue stream.
To get started, it is advisable to consult with a local partner to ensure your business is registered correctly and with limited complications. Biz Latin Hub is a local back office company with an international perspective. We have been assisting companies to establish a commercial presence in Mexico and Latin America since 2014 and can be your local partner during your global expansion. Reach out a member of our team today at [email protected] for personalized support.
Check out the video below for a brief overview of the process to import products into Mexico.