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 Starting a Business in Mexico

1) How to Incorporate a Business in Mexico
When thinking international, doing business in Mexico is the same as everywhere else, it is only a different business environment; and as such, one must be alert to the different rules of the game, be pro-active and do the homework. As in the U.S., there are a variety of business formats in Mexico in which a foreign company can operate.

The most common type of business entities are corporations and limited partnerships (under any of these legal entities, a foreign company may operate an independent company, a branch, affiliate or subsidiary company in Mexico). For the sake of simplicity, this summary report will only address the two most common ways of structuring a company: Corporation (Sociedad An�nima) and Limited Liability Companies (Sociedad de Responsabilidad Limitada).

Corporation (Sociedad An�nima or Sociedad An�nima de Capital Variable) Limited Partnership (Sociedad Responsabilidad Limitada)
They may be up to 100% foreign-owned. They may be up to 100% foreign-owned.
Minimum capital requirements is $50,000 Pesos in capital stock. Minimum capital contribution is $3,000 Pesos.
Minimum of two shareholders in the case of a corporation and no maximum. Administration maybe entrusted to the Board of Directors. Minimum of two partners to incorporate a corporation with limited liability. Management is performed by the partners.
No limit to the life of a corporation. The company exists while there is a business purpose and partners remain the same.
Free transferability of stock ownership. Restricted transferability of partnership shares. Any changes in the partnership composition may cause the partnership to be liquidated.
Operational losses incurred by the Mexican entity or subsidiary may not be used by the U.S. parent company. If structured properly, it may offer tax advantages by allowing operational losses incurred by the Mexican entity to be used by the U.S. parent company.
Limited liability to shareholders. Limited liability is afforded the partners.

In order to select the appropriate corporate structure, one must carefully assess the fiscal as well as operational benefits of the proposed business venture.

The process of establishing a corporation �Sociedad An�nima� or a limited Partnership company �Sociedad de Responsabilidad Limitada� requires of the following elements:

  • Name of the Mexican Company.
  • Capital structure of the Mexican company.
  • Names of the partners or stockholders of the Mexican company.
  • Form of management and names of administrators and
  • Representatives of the Mexican company.
  • Name of the auditor of the Mexican company.

Name of Company
To incorporate a Mexican company, a permit must be requested before the Secretariat of Foreign Affairs, which authorizes the use of the name of the corporation in Mexico. It is customary to submit a list of three possible names for your Mexican Company.

Capital Structure
The amount and structure of the capital allocation of the company has to be determined in Pesos (Mexican currency) and stated in the articles of incorporation and by laws.

Shareholders or Number of Partners
Mexican Law allows that partners or stockholders be individuals or legal entities.

Administration and Representation
The administration of the Mexican company can be entrusted to either a board of directors or a general manager. You may also appoint middle managers and attorneys in fact depending on the company's needs.

Statutory Auditor
Mexican law also requires the appointment of a board of surveillance formed by two or more statutory auditors, whose main function is the supervision of the corporation's administration and operations and protecting the partners' or stockholders� interests.

Before initiating operations in Mexico, it is extremely important to retain the services of a Mexican attorney, or a U.S. attorneys firm that corresponds with a Mexican law firm.

The following information is provided as a general and informative background to business practices in Mexico, and should not be considered legal advice or your sole source of information. Wherever possible you are encouraged to utilize the services of a professional.

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