Establishing a Company in Mexico

If you are considering establishing a company in Mexico, there are certain steps and requirements you need to be aware of. In order to proceed with the incorporation of the Mexican entity, the following information and documents are required:

Review the attached draft bylaws: Take some time to carefully review the draft bylaws provided to you. These bylaws will outline the internal structure and rules of your company.

Decide on shareholders: You must decide which two companies or persons will be the shareholders of the Mexican entity. It is important to carefully consider this decision as shareholders have certain rights and responsibilities in the company.

Issue special powers of attorney: For each shareholder, you will need to fill in special powers of attorney for the incorporation of the Mexican entity. These powers of attorney grant specific authority to individuals or companies to act on behalf of the shareholders during the incorporation process.

Determine share distribution: Decide in what proportion the shares will be divided among the shareholders. The most common distribution is a 99%-1%%% to 90%-10%, but it can be any other ratio agreed upon by the shareholders.

Grant powers of attorney in Mexico: Determine whom to grant powers of attorney to in Mexico. This may include tax advisors for accounting, social security and tax matters, as well as local employees to handle business matters and banking.

Provide necessary documents: Ensure that the following documents are notarized, apostilled, and translated to Spanish (translation can be done after apostille is given if it is not in Spanish):

I. Idividuals:

Official ID (e.g., Passport)

Mexican visa (if the person is a foreigner living in Mexico)

Birth certificate of all shareholders

Document from local tax authority establishing tax ID

Utility service invoice with current address (if official ID does not contain an address)

II. Entities:

Charter of incorporation and bylaws

Power of attorney of the person representing the company

Extract from the Commercial Registry

Utility service invoice with current address (if official ID does not contain an address)

Document from local tax authority establishing tax ID

Person representing the company: follow the same documents as listed for individuals

Now let's explore the most common entity types in Mexico favored by foreign investors:

The most common corporate form chosen by investors is the "Sociedad Anónima de Capital Variable" (S.A. de C.V.) or Variable Capital Stock Corporation. Another commonly preferred form is the "Sociedad de Responsabilidad Limitada" (S. de R.L. or S. de R.L. de C.V.) or Limited-Liability Company. For joint ventures, the "Sociedad Anónima Promotora de Inversión" (S.A.P.I.) is often selected due to its flexibility regarding shareholder rights.

The S.A. de C.V. is a corporation with the capital stock divided into shares. It requires at least two shareholders and has no minimum capital requirement. The bylaws and articles of incorporation define the structure and rules of the company, and shareholders have limited liability.

On the other hand, the S. de R.L. de C.V. is a limited liability company that offers flexibility to elect the treatment of the Mexican entity as a corporation or as a fiscally transparent entity, following the check-the-box regulations in the United States.

Both entity types have their advantages and considerations, so it is important to evaluate which best suits your business needs.

Additionally, there are important obligations to be aware of when establishing a company in Mexico, including registration with the National Registry of Foreign Investments, obtaining a federal tax identification number (R.F.C.), registering with the Mexican Social Security Institute, and applying for necessary licenses.

In conclusion, establishing a company in Mexico requires careful consideration of the entity type, shareholder structure, and compliance with legal requirements. Consulting with legal professionals experienced in Mexican corporate law is highly recommended to ensure a smooth and successful incorporation process.