In recent years, Mexico has experienced economic growth due to reformation in important sectors, like the energy, fiscal, justice and financial sectors. Because of these reforms, the country’s economy is building up again which indicates that the reformation has been successful. Especially the reformation in the energy sector, which has attracted foreign investments in recent years. According to a survey from the OECD (the Organisation for Economic Co-operation and Development), further implementation will add to the economic growth in Mexico and can make it even more attractive for investors to set up a corporation in Mexico. But how to do this? This article will explain how to start up a corporation in Mexico!

What Are the First Steps to Set Up a Corporation in Mexico?

determination of the name and type of company

The first steps of setting up a corporation in Mexico exist out the determination of a company name and the type of corporation.

The first step to incorporate a company in Mexico, is to create the company name. It may include the services that you offer or the name of the foreign company, or both. Also, the  purpose of the company must be given to evaluate the possibility of carrying out the operations of the company, considering that there are activities that are only authorised by fully Mexican companies.

The second step to incorporate a company in Mexico, is to determine if the company will be a Stock Corporation or a Limited Liability Corporation. The LLC is recommended if the holding is also an LLC and its benefits that losses in the Mexican Company may be deducted in the US Company. Here is a brief explanation of how a LLC works in Mexico:

 LIMITED LIABILITY CORPORATION
SHARESLiability of the partners to only pay their contribution: The Limited Liability Company is a corporatation between partners who are only bound to pay their contributions. Existing under a name and exclusively consists of members whose obligation is limited to the payment of their shares.

Members are called partners, and are the central figures of this type of company (intuitu personae, which means attention to the person), so they are usually involved in the administration and the success of the business depends largely on their knowledge.

The contributions of the partners are capital (money or goods). Work or industry contributions are prohibited.

It contemplates two kinds of Meetings: a General Partners’ Meeting (to deal with matters that involve all partners) and the Special Meetings (for matters that only involve a specific category of members).

Capital is represented by social parts.

Social parts can exist of unequal value, but each partner can only hold one social part. Social parts will be in multiples of $ 1.00 (a peso 00/100, Mx Cy).

When the limited liability company is of variable capital, the partners may have two social parts: a social part representing the fixed capital and other social part representative of variable capital. Privileged social parts may be issued, these confer privileged profits but are limited for voting in shareholders meetings.

Unlike the shares, social parts are not credit instruments, as they are just an interest quotation for the partners. For their transfer, the consent from the majority of the partners is needed.

There is no minimum for capital regulated by law.

 

ADMINISTRATIONIt has two mandatory corporate bodies:

  1. The general partners meeting (where the totality of partners decide topics such as granting powers of attorney, increase of capital stock, transfer of shares, change of corporate purpose or name of the company),
  2. The administrative body (individual or collective, Manager or Board of Managers) and
  3. An optional monitoring body, as it is understood that partners know each other and there is trust between them, so there is no need to appoint a Statutory Auditor.

 

ADVANTAGESThe LLC, when it pays dividends to a foreign company that has a stake in it, may have a tax advantage abroad if it is a similar company, such as the Limited Liability Company (LLC) in the United States. This allows them a tax benefit that consists of having the option to apply the provision known as “Check the Box”, which allows American companies to deduct the losses that their subsidiaries abroad send, provided that these subsidiaries are companies that resemble each other.

When liquidating an LLC the publication of the final balance is optional in the Official State Gazette.

  1. Minimum capital stock. The General Law on Commercial Organisations establishes no minimum or maximum of money. The amount must be established in Mexican pesos.
  2. Variable capital stock. If applicable. This is not a requirement for incorporation.
  3. Shareholders: At least two, may be a persons or entity or both. From the total amount of the capital stock, we need to know the amount that each shareholder is going to hold.
shareholders

Each shareholder will be hold a part of the total amount of the capital stock of the corporation.

General data of shareholders: Name, date of birth, telephone number, marital status, place of birth, profession/employment, address, Tax identification number, e-mail. Copy of proof of address and ID will be needed. If it is an entity, incorporation act, and all the general data of its legal representative as listed above.

  1. Confirm if a Board of Director will be instituted or a Sole Administrator will be appointed.
  2. Granting of powers of attorney/Persons who will have some or all of the listed below/indicate if some or all of the powers may be exercised individually or jointly. Administrators of the Company are duly empowered to represent it. Attorneys in fact represent the Company only for all the administrative processes needed for the operations of the Company such as opening a bank account or, in general, execute acts on behalf of the Company (registration before Public Registry of Commerce, Foreign Investment, Tax Authorities). The exercise of POAs may be limited to certain acts or amounts.  
    1. Lawsuits and collections
    2. Administration
    3. Property
    4. Negotiable instruments and credit transactions
    5. Bank Accounts
    6. Labour
    7. Tax
    8. Attorney

Looking for More Information?

Do you still have questions about setting up a corporation in Mexico or other specific questions after reading this article? At Biz Latin Hub we have a wide range of professional and experienced lawyers who are happy to provide you off all the information that you are looking for. Please contact our country manager Alex at [email protected] to find out what we can do for you!

Watch this video to see how you can form a company in Mexico!