How do I start a business in Mexico?

A lot of foreigners erroneously think that they can’t start a business in Mexico. I guess it is the same for me as a Mexican doing business in the States. There is no law saying that you cannot. All you have to do as an American in Mexico to start a business is set up a corporation where you as an American can be the director or president of the corporation and own 100% of the corporation. The purpose is just a Mexican entity is just to do the paperwork. Once that happens, you...

A lot of foreigners erroneously think that they can’t start a business in Mexico. I guess it is the same for me as a Mexican doing business in the States. There is no law saying that you cannot. All you have to do as an American in Mexico to start a business is set up a corporation where you as an American can be the director or president of the corporation and own 100% of the corporation. The purpose is just a Mexican entity is just to do the paperwork. Once that happens, you can start doing any kind of business in Mexico.

 

I am not certain about this but it might be that if you are going to have a US person working for your company, you would have to prove why a Mexican is not capable of doing that job. Once you prove it then an American can do the job.  Otherwise, you have to hire Mexicans. Other than that, it is a free market. 

 

If you are someone who has an Internet business, which a lot of younger people do, you can go to Mexico and just take your Internet business with you. If it is a home-based business and it is not very highly tracked such as if you are just going to get a city license to do business in the city, you really do not need a license because it is not too big an order.

 

The only thing that is a little bit tricky here is how you pay taxes. If you are a United States citizen, wherever you live or wherever you make your money doesn’t make any difference, you have to file taxes. Mexico says that the only reason you would have to pay taxes to Mexico is if the money that you made while you were living in Mexico came from Mexico. If you live in Mexico, and you have a business and that business is an Internet business, for example, and it has generated its income from the US, you would not owe the Mexican government anything in taxes.   

 

(Goodyear Mexico ad, pictured.)

In order to start a business in Mexico, the first thing you need is at least temporary residence.  

 

Once you have the temporary residence you need to go to a notario (notary), and this notario is able to set up a corporation.  The notario will need some information from the individuals opening the corporation, including about the shareholders and the name of the corporation, in order to register it.  The owners pay a fee.

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In order to start a business in Mexico, the first thing you need is at least temporary residence.  

 

Once you have the temporary residence you need to go to a notario (notary), and this notario is able to set up a corporation.  The notario will need some information from the individuals opening the corporation, including about the shareholders and the name of the corporation, in order to register it.  The owners pay a fee.

 

Everything is done by the notario, as opposed to an attorney.  Sometimes the people forming the corporation will hire a lawyer in order for that lawyer to be the link with the notary if the founders aren’t aware of the laws and regulations surrounding company formation. In our case, I have an agreement with several notarios to setup a corporation, so in addition to my other activities, I provide guidance to my clients when they want to setup a corporation. I work with the notario, who prepares all the paperwork, I review all the information and give it to my clients just to sign. However, you can hire your own attorney, an attorney linked with the notario, or you can go to the notario directly.

  

Once you set up the corporation you need to go to the tax authorities, which we call “SAT”, for  Servicio de Administración Tributaria. This is the part of the Mexican government that does inscriptions for individuals and corporation of Mexico. You need to take the notary paper with the ID, with your resident or immigration status.

 

You will need at least two shareholders in order to set up the corporation. It’s not like in the States where you can open a company as an individual.  Currently, there’s a discussion in the Mexican Congress to approve a new law to allow a corporation to have a single shareholder. It’s an issue of debate because many people are against the law and many people are supportive of the law

 

You you need to decide what kind of corporation you want to open; a Sociedad Anonima de Capital Variable (SA de CV; an “anonymous corporation”; like a “C Corp” in the US) or a Sociedad de Responsabilidad Limitada de Capital Variable (S de RL de CV; something like an LLC in the States)

 

I generally recommend the Sociedad Anonima de Capital Variable (the “Anonymous Society)” as opposed to the notaries, who generally recommend the Sociedad de Responsabilidad Limitada de Capital Variable.  In the Anonymous Society, shareholders don’t have a link between them except the idea to make business. Let’s say Jose and Pedro want to start a business and are shareholders.  How does Jose know that Pedro is doing the proper things?

 

In the Anonymous Society, there’s a leader called a comisario, which is a third party in the corporation who is obligated to report to all shareholders how the business is doing.  Corporations are obligated to do an annual meeting with all the shareholders so the shareholders are informed as to the status of the company, if the company has profit or losses, etc. That’s why I recommend the that the company is formed as an Anonymous Society; because those investors need to be sure that the company is being run or managed properly.  Also, the Sociedad Anonima de Capital Variable provides a corporate shield to shield any shareholder from any liability or responsibility of the activities of the corporation, and the corporation exists as an independent entity from the shareholders.

 

If you choose a Sociedad de Responsabilidad Limitada de Capital Variable, you don’t need a comisaro.  

 

(Urban scene, Merida , Mexico, pictured.)

There are different forms of companies you can form in Mexico and which one is best for you could be different than for someone else, but in a general sense, it is usually better to create a corporation.

 

In order to form a corporation, you would need an accountant and you need a corporate lawyer, like me.  I only need as an example three corporate names in order to do the research for a corporate name and to then obtain the corresponding permit that...

There are different forms of companies you can form in Mexico and which one is best for you could be different than for someone else, but in a general sense, it is usually better to create a corporation.

 

In order to form a corporation, you would need an accountant and you need a corporate lawyer, like me.  I only need as an example three corporate names in order to do the research for a corporate name and to then obtain the corresponding permit that we sign before a notary. We obtain registrations from the National Registry of Foreign Investment, from the Registry of Commerce and then after that we will be able to open a corporate bank account.

 

By means of a corporate bank account, you could do business, pay taxes, declare taxes and pay your invoices and as well to issue checks. This is in very general terms what we need to do to open a business. In terms of operating the business on an ongoing basis, we need a physical address.  Depending on several issues, the process could take between 15 days to a month and a half.

 

The cost could be between US $800 up to $1,000, depending on the specific type of corporation and the specific notary. In terms of the notary and my fees, it will be approximately $1,000 up to $1,250 to create the articles of incorporation by laws and inscription and based on the legal representation, I usually charge $600. The total would be around $2,750, which would include notary fees, taxes, government fees, contributions (the inscription on the public registry, the payment of the official paper of the public deed), legal fees and all the inscriptions.  The inscription is the registration of the by laws and the public registration of the property and the commerce.

 

You need to have a Mexican on your Board only for certain activities, not for regular activities. You also don’t need to have a Mexican shareholder.

 

A foreign citizen can start a business in Mexico, even one without a permanent residence in Mexico.  There are no residency requirements in order to start a business in Mexico, but in order to exercise the charges as a legal representative of the company, you do need the resident’s document. You can obtain this resident’s document after the corporation is formed, and then qualify to act as the legal representative of the company. If you don’t have the residency requirement, you could just have someone who did (or more likely, a Mexican citizen who was an attorney) act as the company’s legal representative.

 

(Upscale steakhouse and bar in Playa del Carmen, Mexico, pictured.)

Starting a business in Mexico is very easy. First you have to decide what type of corporation or incorporation you want to do. Most people decide to do a SADCV, which stands for Sociedad Anonima De Capital Variable. To do that, you need to have more than one partner; you cannot be by yourself. You can split the percentages between those partners however you would like. You would need to be a resident of Mexico. If you are a foreigner, you need to have either a permanent or a temporary...

Starting a business in Mexico is very easy. First you have to decide what type of corporation or incorporation you want to do. Most people decide to do a SADCV, which stands for Sociedad Anonima De Capital Variable. To do that, you need to have more than one partner; you cannot be by yourself. You can split the percentages between those partners however you would like. You would need to be a resident of Mexico. If you are a foreigner, you need to have either a permanent or a temporary residency. However, if it is a temporary residency, you have to be allowed to either work or be an investor, for which you need to show a certain amount of money in the bank.

 

If you are a permanent resident, you are free to do or open a business. You do not need any other work permits after that. These rules change from time to time but right now, I believe they want at least 5% of the business to be owned by a Mexican or a permanent resident. So if you are a foreigner, you need to have at least one Mexican partner or a permanent resident partner.

 

You also need to start off with at least 50,000 pesos (US $2,700) in the bank or inventory. You will need to go to a notary and tell them your activities. They incorporate you, which will vary on the amount of money that you start with. It is also going to vary on the municipality where you are incorporating, but typically, starting a business in Mexico is not very expensive. It is probably similar to what it would cost in the States.

 

Usually your local real estate brokers will be able to recommend a notary because every real estate transaction is done through a notary so certainly the brokers were aware of who are the notaries. The same notaries would do your real estate transactions and incorporations. Once you are incorporated, the notary should take care of all the registration process, taxes, and so forth.

 

There are really no ongoing costs related to the legal aspect of the business. You do have to become active with the Mexican IRS, which is called Hacienda. Once you are active, you need to start paying an accountant to make tax declarations monthly even if your revenue is zero. I am a foreign citizen but a permanent resident of Mexico and as a company owner, I need to declare as a company and I need to declare as myself as well even if all my income is through the company and my personal income is zero. You need to immediately get an accountant on board that will declare both you and the company. 

 

In my case, I am 90% owner of the company and I could have been at least 95%. To do that you need the business to be SADCV and you need to have a partner, whether you are a foreigner or a Mexican because otherwise it is not a “sociedad” so because of that, the type of corporation alone, you need at least a 5% partner. 

 

There are others types of companies as well. For example, if you are in real estate or if you are a chef, you could just become active at the Hacienda (Mexican IRS) as a physical person or as an entity.

 

(Artisan market,Lake Chapala, Mexico, pictured.)

It’s not easy to start a business in here Mexico. Starting a business in Mexico requires a lot of paperwork. I used to have a gift shop here in Mexico, and I was lucky because at the time I started my gift shop, I had a Mexican friend who was perfectly bilingual. My friend made it easy for me to take care of the paperwork, but it still took us quite a while to get all the paperwork ready. 

  

In starting a business in Mexico, you need to have...

It’s not easy to start a business in here Mexico. Starting a business in Mexico requires a lot of paperwork. I used to have a gift shop here in Mexico, and I was lucky because at the time I started my gift shop, I had a Mexican friend who was perfectly bilingual. My friend made it easy for me to take care of the paperwork, but it still took us quite a while to get all the paperwork ready. 

  

In starting a business in Mexico, you need to have guidelines to let you know the right things to do because it’s not an easy process. 

 

The process I went through in starting my own business in Mexico involved filing my income taxes, getting a business license, and going into different offices. No two processes were done in a single office. For example, the income tax is filed in this office where you have to wait for about 30 minutes before you are entertained. You then need to go from that office to another one to do something else. If you have nobody to guide you, getting your paperwork ready is a pretty difficult and lengthy process. 

 

 

When I put up my gift shop here in Mexico, it cost me a lot of money to buy the furniture and everything else the store needed. Other than that, the process was pretty cheap, though. The legal fee is paid and then the license is released. I had my gift shop a couple of years ago, but I remember that getting everything ready for your business can take a few days to complete. It can be confusing, especially if you don’t know which offices you need to go to in order to get a permit.

 

(Jet Metier of Best Places in the World to Retire in a gift shop in Puebla, Mexico, pictured.)