Mexico is home to multitudinous international businesses of all sizes and more foreign investors are planning to establish their companies in the country. The region boasts a diverse range of attractive sectors, and the country´s liberal trade and commercial policies encourage foreign investment.
But before entering the Mexican market, investors have to make up their mind about which of the several entity types to use for their business – this will be based in their specific commercial needs and requirements in the region.
Legal Entity Structures Mexico
In most cases, a foreign company may decide between forming a local/independent company or a foreign branch office. In this article, we will concentrate exclusively on the formation of a Mexican independent company, also called ‘Subsidiary’. There are 3 main entity types that can be established in Mexico:
S.A. de C.V – Sociedad Anónima de Capital Variable
The S.A. de C.V. is a variable stock corporation that has no limit on how many shareholders own shares of the company. The minimum starting investment of MXN$50,000 (about US$2,500) is, therefore, easier attainable. The entity must be managed by an administrator or a Board of Directors and annual general shareholder meetings must be held.
S. de R.L. de C.V.: Sociedad de Responsabilidad Limitada de Capital Variable
The S. de R.L. de C.V. is a Limited Liability Company (LLC) is a legal entity that is split into shares. In comparison to the variable stock company, the minimum investment requirement for an LLC amounts to only MXN$3,000 (about US$150).
Incorporation Process of a Mexican Subsidiary
Incorporating a subsidiary in Mexico can come with several challenging requirements and bureaucratic processes. Therefore, we will make the incorporation as clear as possible in the following parts. However, we recommend engaging a local partner to assist you during the incorporation.
These are the main 5 steps that need to be taken in order to incorporate a subsidiary in Mexico:
Draft a Power of Attorney/s (POAs), which will grant your local partner the permission to incorporate the business on your behalf.
Requirements: In order to prepare the POAs the following documents are required:
- Passports of the Signatories for the company shareholders of the new companies, i.e. the Directors, who have the appointed legal faculties to sign on behalf of the “to be” company shareholders.
- Proof of address for the signatories, no older than three months (ideally a utility bill). However, other documents may be suitable.
Have the POA legalized for each shareholder.
For Mexico, a minimum of 2 shareholders is required for the incorporation process. In addition to the POA, all of the other documents to be mentioned in this step need to be legalized, as well.
Requirements: the following documents need to be provided for each shareholder/partner:
- Certificate of incumbency
- Deed of incorporation
- Certificate of director/s. This is a document that lists the official Directors of the company and their associated powers/legal faculties
- Proof of address of the shareholder company (the same as in Step 1)
- Passport of the Signing Director (the same as in Step 1)
- Proof of Address of the Signing Director: A utility bill or a bank statement, for example.
- Beneficial owner details identifying the individual considered the final owner or beneficiary of the shares of the company.
- KYC of its legal representatives/director.
The above mentioned corporate documents (plus the POAs) need to be legalized and apostilled, and once you are in Mexico City, they will be officially translated into the Spanish language.
To maximize the efficiency of the second step, the following documents should be provided by the investor so that the bylaws can be prepared simultaneously:
- A list of up to five (5) company names, which have to be checked for availability by the local Public Registries authority.
- Provide a short summary of the “business activity and purpose” of the new legal entity.
- Confirm the preferred share capital amount in Mexican Pesos. The recommended amount is a minimum of MXN $50,000.00, the equivalent of USD $2,500.00).
- Confirm whether there will be a Board of Directors or a sole administrator, and who will be appointed as the company Legal Representative/s. It is strongly recommended that the client responsible for the incorporation process is appointed as the sole administrator, which can also be a foreigner.
- Additionally, a legal representative, who must be a Mexican national or a foreigner with the right to live and work in Mexico, should be employed. This will allow day-to-day administrative and banking activities to be managed by the legal representative.
Finalize the drafting of the company bylaws and have them reviewed for approval
Requirements: An official translator needs to be engaged to complete the legal translations of all documents into Spanish.
Proceed with the formal company incorporation.
Initiate the bank account opening in accordance with the clients’ requirements.
ADDITIONAL INFO: The estimated time needed for the incorporation process is between 8 and 10 weeks once all the required documents highlighted in step 4 are provided.
Are you interested in establishing a Mexican subsidiary?
The company incorporation process seems somewhat challenging for businessmen/women who are unfamiliar with the Mexican business environment. Nevertheless, they shouldn’t abstain from entering the Mexican market given that Mexico offers a wide and diverse range of business opportunities for companies large and small.
We at Biz Latin Hub have the experience and a local Mexican team of experts that may attend to your unique business needs. If you are interested in expanding your company to Mexico, don’t hesitate to contact our country manager, Alex Mahoney for more information or support.
Interested in doing business in Mexico but don’t know how to get your visa? Check out this video for more information.