LLC formation in Mexico is popular among foreign investors entering Latin America’s second-largest economy, and not only because it is a rapid and straightforward process.
Because forming a limited liability company — known in Mexico as a Sociedad de Responsabilidad Limitada (S. de R.L.) — carries with it a range of other benefits, including the fact it can be undertaken by a natural or legal person of any nationality using capital declared in any currency.
What’s more, with only two shareholders needed for LLC formation in Mexico, and the minimum share capital set at only a few hundred US dollars — with shareholder liability limited to their capital investment — the process is accessible to a wide range of investors.
If you are interested in LLC formation in Mexico, read on to understand the five steps in the process, as well as getting some insight into the Mexican market. Or go ahead and reach out to us now to discuss your business options.
5 key steps to LLC formation in Mexico
While you will want to seek out the assistance of a good corporate lawyer in Mexico to guarantee that the process runs smoothly, LLC formation can be completed via the following five steps:
Step 1: Draft and authenticate the company bylaws
The first step towards LLC formation in Mexico is the drafting and authenticating of the company bylaws, which will include the likes of the company structure and the focus of the business, as well as details of its shareholders and assets. Authentication comes by registering the documentation before a notary public.
Step 2: Register the bylaws at the Public Registry of Mexico
When you register the authenticated bylaws at the Public Registry of Mexico, that body will do a careful review to guarantee that all aspects of the statues included are in keeping with Mexican law. Once those bylaws are approved, your LLC will be considered legally registered and will be governed by Mexican laws.
Step 3: Obtain a Tax ID
With your LLC in Mexico now registered, you will need to obtain a tax identification number from the Federal Taxpayer Registry (Registro Federal de Contribuyentes; RFC), with your tax obligations governed by the nature of your business.
Step 4: Obtain a commercial license and register the LLC with the municipality
After registering your LLC at the federal level and applying for a tax ID, you will need to obtain a commercial license and register the entity with the municipality where it will be based. Like at the federal level, this process will involve specifying what your commercial activities entail.
Step 5: Complete LLC formation in Mexico by opening a bank account
The final step to complete LLC formation in Mexico is to open a corporate bank account, which will involve presenting the following documentation:
- Copy of passport or ID of all shareholders
- A document verifying shareholders’ residence addresses
- Proof of income or a copy of income tax return, financial statements, or employment reference letter
Your legal representative in Mexico will be able to advise you on whether a particular bank account provider is best suited to your needs, based on the nature and location of your business.
The Mexican market
Mexico boasts the second-largest economy in Latin America based on gross domestic product (GDP), behind only Brazil. While GDP has fluctuated, it has continued on a generally upward trajectory, increasing almost six-fold in the three decades after 1989 to hit 1.27 trillion in 2019, following three years of strong growth (all figures in USD).
The country’s increase in GDP has been met by a concomitant rise in prosperity, with gross national income hitting $9,430 per capita in 2019 — a figure that placed the country as an upper-middle income nation based on classifications established by the World Bank.
Mexico is a major trade hub in the Americas, with high-volume ports serving both the Pacific Ocean and the Gulf of Mexico, and the country is the 17th-largest exporter in the world. Meanwhile more than $1.7 billion of goods transit its 3,145 km (1,954 mile) border with the United States every day.
Businesses based in Mexico benefit from preferential access to the massive US and Canadian markets thanks to the United States-Mexico-Canada Agreement (USMCA) — a free trade arrangement signed in 2018 to replace the North American Free Trade Agreement (NAFTA) and which came into force in 2020.
Mexico also has a slew of FTAs in place with major economies from around Latin America, as well as Japan, while it is also a founder member of the Pacific Alliance — a ten year old economic integration initiative that also includes Chile, Colombia, and Peru, and which has ambitions to extend beyond the Western Hemisphere.
While Mexico’s agricultural sector only accounts for less than 4% of GDP, fresh produce such as corn, tropical fruits, and vegetables are major export products. Meanwhile, the country has a highly developed manufacturing sector accounting for more than 30% of GDP, with computers, medical equipment, and vehicles among the most important goods exported.
However, the services sector is the most important economically, generating more than 60% of GDP. While the country is home to a growing professional services industry, it also boasts considerable development in IT and technology, and is a major hotspot for innovation and tech outsourcing.
All of these factors contribute to make LLC formation in Mexico popular and the Mexican market one of the top destinations for foreign direct investment (FDI) in Latin America, with more than $29 billion in FDI inflows registered in 2019.
Biz Latin Hub can help with LLC formation in Mexico
At Biz Latin Hub, our team of experienced company formation agents is equipped to help you enter the Mexican market and take advantage of the country’s business opportunities. With our complete portfolio of corporate legal, accounting, and back-office services, our multilingual team is equipped to deliver excellence and ensure the success of your LLC formation in Mexico. We also operate in 17 other jurisdictions around Latin America and the Caribbean.
Contacts us now for personalized assistance or a free quote.
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