Tuesday, March 5, 2024

Everything you need to know before opening a business in Mexico: Part 2

If you haven’t read it yet, then check out Everything you need to know before opening a business in Mexico: Part 1 for potential problems, solutions, and benefits if you’re just considering getting started abroad. Now that we know opening a business in Mexico as an expat is an achievable goal, let’s get into the nuts and bolts of the process. There are a variety of options for foreigners who want to open up shop in Mexico. 

The three most popular are via:

  • Stock corporations, involving significant investments or large-scale corporations. Owners are known as shareholders.
  • Limited Liability Companies, best for small businesses. Owners are known as partners and two partners are required to operate.
  • Shelf companies, the purchase of a pre-existing legal business with no activity to date.   

Depending on which avenue you decide to take, requirements may vary. Some of the steps below are applicable to stock corporations and shelf companies and it’s useful to know what might be requested.

Here are 10 steps to take you from dreamer to foreign business owner…in Mexico!

Hire a lawyer

This isn’t a requirement, but rather a firm suggestion. Navigating the complex process of incorporating a business as an expat can be tricky. There are fine-print expectations that, if not followed precisely, can lead to hefty fines. 

For example, Article 32-B Quáter states that improper documentation of a Beneficial owner can levy a fine of up to 2,000,000 pesos (US $ 116,000). If your company is public and backed by another corporate entity, each of the shareholders of that entity is considered a Beneficial owner and, regardless of the number of shareholders, all must be properly documented according to the law.

Confirm that your business niche is legal

There are certain industries that are restricted for foreigners. Examples include petroleum, electricity, currency exchange, and domestic land transportation. In addition, there are activities in which foreign participation is limited to a specific percentage – generally between 10% and 49%. This is common in sectors such as agriculture, fishing, newspaper circulation, and broadcasting. This list is not exhaustive, and a lawyer can determine what’s within your rights as a potential business owner.

Choose a corporate representative

It could be you, as long as you have both a Mexican Residency Visa and Tax ID. With your residency card will come a CURP, or Unique Population Registration Code. This is similar to a social security number in the U.S. or a national insurance number in the U.K.

Choose a notary public

Aside from a lawyer and accountant, this is the most important relationship you will have when registering your business. He or she will be present for most transactions and will submit critical paperwork (i.e. your company name to the Foreign Affairs Ministry to review for trademark issues) for approval. Few entities will accept e-signatures in Mexico – handwritten signatures are as crucial as in-person meetings and a Notary Public must be present.

Compile your Constitutional Act (aka deed)

This title must state clearly the investment, business type, registered address, internal bylaws, and additional requirements depending on the company you are starting. This is much easier to do with legal assistance. In order to officialize the Act, it must be notarized with all owners present. Each owner must provide proof of:

  • Mexican residency
  • Mexican Tax ID & CURP
  • Proof of personal address
  • Proof of business address

Now, you wait

The approved physical copy of your Constitutional Act can take anywhere from a few days to a few weeks to arrive. 

Register with the Mexican IRS (Secretaria de Administración Tributaria)

Whoever is chosen as the Corporate Representative must register with the physical copy of the Constitutional Act and proof of business address.

Register with the Mexican Public Registry

This is essential to start and requires a physical copy of the Act. Without approval from the Public Registry, your business is just a name on paper. 

Open a business bank account

Not a requirement, just another firm suggestion. You will need a Tax ID, CURP, the Constitutional Act in physical form, proof of address, and whatever else your specific bank requires. 

Enjoy a celebratory tequila because you’re now officially a business owner in Mexico! 

Yes, there are more steps from here, like tax structuring, permit acquisition, and licensing considerations that will be specific to your business. Still, most of the hard work is complete! Opening a business as a foreigner in Mexico is possible. It just takes a bit of tenacity and a lot of confidence.

Bethany Platanella is a travel planner and lifestyle writer based in Mexico City. She lives for the dopamine hit that comes directly after booking a plane ticket, exploring local markets, practicing yoga and munching on fresh tortillas. Sign up to receive her Sunday Love Letters to your inbox, peruse her blog, or follow her on Instagram.

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