Mexico Entity Setup

A Sociedad Anónima (S.A.) is a type of corporate entity in Mexico that is comparable to a corporation in other countries. The S.A. is a legal entity separate from its owners (shareholders). This structure means the company itself can own assets, incur liabilities, enter into contracts, and be sued independently of its shareholders. One of the primary features of an S.A. is limited liability for its shareholders. This means that the personal assets of the shareholders are protected; they are only liable for the capital they have invested in the company.

A Sociedad de Responsabilidad Limitada (S. de R.L.) is a popular business entity in Mexico, especially among small to medium-sized enterprises. It’s similar to a Limited Liability Company (LLC) in the United States. The primary feature of an S. de R.L. is that the liability of the partners (socios) is limited to their capital contributions. This means their personal assets are generally protected from business liabilities. An S. de R.L. requires a minimum of two and a maximum of fifty partners. These partners can be individuals or legal entities, and there are no nationality restrictions.

The Sociedad por Acciones Simplificada (S.A.S.) is a relatively new and innovative corporate entity in Mexico, designed to streamline the process for small and medium-sized enterprises (SMEs) and entrepreneurs. The S.A.S. is designed to simplify the incorporation process and reduce the administrative burden for small businesses. It can be entirely incorporated online, making it an accessible option for entrepreneurs.

No minimum paid up capital however it is common practice for companies in Mexico begin with a share capital of up to USD$2,500.

The Law of Commercial Companies allows for 100% ownership of Mexico companies by foreign persons or entities. 

Every Mexican company must have a minimum of two partners. Both foreign individuals (natural persons) and foreign companies (legal entities) can be partners. That said, one of the partners can own 99.9% of the company, which would give him total control.

The secretary is responsible to maintain and keep the corporate books updated. The corporate books shall remain in Mexico; thus, it is advisable to appoint a Mexican resident as secretary of the board of directors. The Mexican Company Legal Representative acts as the “legal face” of the business and is the individual who must sign for all company operations; in-turn, they have the legal responsibility to ensure the company operates correctly in the eyes of the local law. This individual must be either a Mexican national or a foreigner who legally resides in Mexico.

A fiscal/legal address is a minimum statutory requirement for all legal entities that have commercial operations in Mexico. This address will be registered with the Mexican tax authorities and will be used for all official business communication such as mailing and tax purposes.

The Ministry of Economy (Secretaría de Economía) authorizes the Company’s Corporate Name. Please remember this name is not your brand, just your company’s name. The Ministry of Economy uses a phonetic search, so it’s a good idea to think of non-similar names.

Companies in Mexico, by law, need to have a registered address. So, to incorporate a company in Mexico, you need to register an address. This cannot be a “virtual location.” When a company is going to open a physical location, this is not a problem.

You need to choose the Governing Body of the Company. The Governing Body may be a Board of Managers with at least two persons or a Sole
Administrator. Usually, one of these individuals is the company’s legal representative and bears the corporate signature.

Foreigners can own 100% of a company’s equity in Mexico. However, you will need a person representing the company to operate. This
person can be a foreigner or a Mexican citizen. However, if he is a foreigner, he would need to obtain his Mexican residency visa, his Mexican tax I.D., and his Unique Population Registry Code (CURP) to be able to represent the company. You must start looking for this person when you begin your expansion if you wish to establish a legal entity.

If the shareholders are not able to travel to Mexico, it is common practice to grant a unique and limited power of attorney (POA) to a local service firm. With this limited POA, a partner firm can incorporate the company in the representation of the partners, register the company, get the tax ID, and open the bank account.

Typical charter documents include the articles of incorporation, bylaws, stock certificates and (a) stock ledger, (b) shareholders’ meetings ledger (c) board of directors ledger and (d) capital variations ledger.

The final step is to decide the bank to work with. Mexico has a growing banking infrastructure that startups and hyper growth companies alike benefit from. The process of establishing a bank account can be an unexpectedly long process that many companies do not sufficiently plan for. This can include extensive application documents, notarized director documents, KYC documentation and in person signatures. Common local banks in Mexico include Santander, BBVA, Citibanamex and HSBC.

The Mexican company registry is the public institution providing legal certainty to the formation of companies in Mexico and all other commercial legal acts. It is called the Public Registry of Commerce (PRC).

To register the Company before the Tax Administration Service Office and obtain Company Tax ID (RFC – Registro Federal de Contribuyentes) and obtain eFirma qualified electronic signature.

The institution in charge of social security in Mexico is the Mexican Social Security Institute, commonly known as IMSS, because of its name in Spanish (Instituto Mexicano del Seguro Social). Therefore, IMSS’ mission is to provide medical attention and social security to all Mexican workers. Firstly, every company that hires a worker must register itself before the Mexican Social Security Institute as an employer. This is called Alta Patronal, which roughly translates to Employer Registration.

The Impuesto Sobre la Renta (ISR) is Mexico’s income tax, applied to both individuals and businesses on their income. It’s a critical component of the country’s tax system, managed by the Servicio de Administración Tributaria (SAT). The ISR system is progressive for individuals, meaning rates increase with income. For businesses, the rate is typically flat, but specific conditions can affect the applicable rate.

According to the Foreign Investment Law (FIL), the inscription at the National Registry of Foreign Investments (RNIE, in Spanish) is required for companies who operate in Mexico.

The Institute for the National Fund for Employee Consumption is a government entity aimed to grant credit to affiliated employees for the acquisition of high quality products and services.