Business Opportunities in Mexico
Commercial prospects in Mexico are plenty for entrepreneurs looking to expand their horizons. The country is a gateway to the Latin American market and ranks 15th in the global economies. Nevertheless, there are several economic possibilities in Mexico now for investors looking to relocate as soon as possible.
Between 1986 and 2019, Mexico’s gross domestic product (GDP) grew exponentially. By the end of that period, it had reached $1.27 trillion (all figures in USD) and in 2021, the GDP rose to approximately $1.29 trillion. The country’s gross national income (GNI), a crucial indicator of overall prosperity, exhibited positive growth in 2019 and hit $9,430 per capita, making it an upper-middle-income country by global standards.
Moreover, Mexico has 11 free trade agreements reducing the barriers to imports and exports for businesses. It is one of Latin America’s most sought-after foreign direct investment (FDI) locations, totalling $29 billion in 2019. Geographically, the nation benefits from its geographic location as the entry point between Latin America and the two major economies- the United States and Canada, with the latter serving as the leading market for commodities produced in Mexico. The country has also signed the North American Free Trade Agreement with these nations eliminating most tariffs on trade.
Some of Mexico’s main exports are petroleum oil, automobiles, electrical equipment, e-commerce, and fresh produce, with the United States receiving 76% of all Mexican exports. Other significant locations include China, Taiwan, Germany, and Canada.
Here are the meticulous details regarding the company registration process in Mexico and how to start a business in Mexico.
Benefits of Starting a Business in Mexico
Mexico’s largest stock exchange in Asia accounts for about 10% of the global economy. As one of North America’s biggest markets, Mexico attracts foreign entrepreneurs worldwide. There are a variety of advantages of doing business in Mexico, such as –
- The Mexican government has improved its infrastructure by focusing on energy, telecommunications, and transportation industries to make investments in Mexico more profitable.
- Mexico maintains 11 free trade agreements with 44 nations, more than any other nation.
- The consumer economies of North and South America are directly connected to Mexico. In addition, a minimum of 53 million Mexicans eager to spend money on goods have access to the internet.
- Mexico has good capital potential and is the 11th-best country in the world for giving new international enterprises access to loans. The currency is lower, giving you more buying power for your business or domestic investments.
- The United States-Mexico-Canada Agreement (previously known as NAFTA), a trade pact between the USA, Canada, and Mexico, is anticipated to give Mexico’s automotive, electronic, and energy sectors a high degree of stability.
- Mexico also has a favorable currency exchange rate of $1, equivalent to MXN 20.15.
- The IMMEX program offered by Mexico is another benefit for traders setting up business in Mexico. The IMMEX program helps manufacturers import materials tax and duty-free, as long as finished goods are exported.
- Mexico gives access to a qualified workforce at a reasonable wage cost. The STEM industries employ a sizable number of people. The benefit in this situation is that you can hire employees who will operate in a relative timezone by using a reputable PEO provider like Multiplier.
Requirements for Starting a Business in Mexico
Foreign Exchange and Foreign Trade Act (FEFTA) oversees all foreign investments in Mexico. The Ministry of Economy, Trade, and Industry (METI), Ministry of Finance (MOF), and other relevant Mexican ministries govern all employment and investments. The Bank of Mexico reviews foreign investment transactions covered by the FEFTA. Investors must submit all notifications and reports to the government through the Bank of Mexico.
Some of the major requirements to start a business in Mexico are
Select a company name
First, the Mexican Ministry of Economy needs to approve the name of your business in Mexico. Therefore, it is preferable to generate 4 or 5 names and rank them according to suitability.
Decide on the governing body
A Board of Directors of at least two members or a Sole Administrator may serve as the Governing Body. Depending on your organization’s scale, you might also elect a secretary, treasurer, and president. Once the ruling body has been chosen, request identification and evidence of address from each member. You will need it later.
When registering your company in Mexico, you must also register your business’s economic activity. In the case of non-compliance, your company may have to face some legal issues.
Foreign business owners must appoint a legal representative who can sign important documents on their behalf. The legal representative should be an adult. They can be either a Mexican citizen or have permanent resident status.
Information about shareholders (partners)
When starting a business with more than one owner/ shareholder, you must gather their details. Individuals or other businesses may be shareholders in the corporation.
If the shareholders are individuals, you need their complete names, passports, and documents proving their addresses.
The Signing Officer must sign if the stakeholders are other corporations. They can incorporate via a power of attorney or take a trip to Mexico, similar to individual stockholders. Furthermore, he must describe the visit’s objectives as business-related activities. You only need the legal representative’s full name, passport, and evidence of address. They must provide an apostilled power of attorney and a copy of their passport if someone acts on their behalf.
Registration of Public Property and Commerce
A valid registration in the Public Property and Commerce Registry is required for any company founded in Mexico. It maintains a list of retailers available to the public. You must provide the following during this process:
- The incorporation document (Constitutive Act)
- IRS Taxpayer Identification Number (RFC)
Create a business bank account
It is advisable that businesses open a separate bank account to have a clear history of the transitions. Before Public Property and Commerce Registration, you can apply for a Mexico-based bank account. All you need is a Public Notary document. However, you must take that action. The business won’t be able to operate without it. A legal representative may open a bank account. The procedure is standard across nations.
Registration with the Mexican Social Security Institute
Businesses must register their company with Mexican Institute for Social Security or Instituto Mexicano del Seguro Social (IMSS). The fact that you are the lone worker at your business doesn’t matter. You must do this because you must pay into your social security fund. Be careful; the government may penalize you if you don’t finish this quickly.
Types of Business Structures in Mexico
Common business structures used by foreign enterprises to set up a business in Mexico are
Stock corporation (Sociedad Anónima de Capital Variable) –
- Mexican businesses use the stock corporation structure as it has the most scope for profit and company growth.
- A stock company’s “worth” is divided into shares upon formation. In most cases, the creditors safeguard these shares.
- There is no limit on the number of shareholders involved in a stock corporation. You can raise the required funding even if your business is young.
- The needed capital is 50,000 MXN or roughly 2,700 USD.
Limited liability company (LLC) –
- In terms of popularity, Limited Liability Companies trail Stock Corporations.
- Each LLC bases its worth on shares, just like the SC.
- An LLC is an instrumental structure for small and medium-sized businesses.
- Just MXN 3,000, or around $160, is required as a start-up deposit.
- Rather than paying as a single corporation, LLC members each file their tax returns to cover their tax obligations.
- Each member’s valuables are always protected. They are therefore only liable for their stock holdings in the business.
Simplified shares company –
- The Simplified Shares Company is a different significant corporate structure. You can also find these businesses in Argentina and Colombia, and Mexico.
- This corporation can be formed more quickly and for less money than SC and LLC.
- It offers a quick client-provider pathway and a straightforward corporate structure, making it perfect for SMEs.
- The limitation on annual maximum permissible revenue of MXN 5,000,000, or around USD 265,000, is a drawback of this corporate structure. You will ultimately need to adapt to a new structure if your business plans to expand above this cap.
Company Registration Process
To register a business in Mexico, follow these ten simple steps:
1. Authorize your legal representative to act on your behalf (POA)
Business owners who are not settled in Mexico can appoint a legal representative on their behalf. The legal representative should either hold Mexican citizenship or resident status. They should also carry a local tax ID. Now, draw up a power of attorney (POA) that gives your legal representative the right to sign relevant documentation on your behalf.
2. Select business structure
You can select a business structure depending upon the type of business activity. It is also important to decide whether a person will be physically available in Mexico for the process or if the task will be assigned to an expert.
3. Choose a company name and register
The next step is deciding on the company name. You are suggested to come up with a company name representing the company’s main goal. Moreover, make at least three suggestions to the Ministry of Economy. The Ministry will then approve the company name. The procedure may take three to seven days for approval.
4. Create the company bylaws for your entity
The company bylaws describe your firm’s objectives, structure and operations. You must have them notarized by a notary public for them to be recognized by local authorities.
5. Declare your company to local authorities
You can register your company with local authorities only after the notary public legalizes your bylaws. Your legal counsel can sign up your company with the Public Registry of Property and Commerce in Mexico. During this procedure, your legal counsel must detail any real property owned by the business and its business aims and objectives.
6. Request a corporate tax identification number
The Tax Administration System of Mexico will issue your corporate tax identification number. Your tax ID number is crucial for understanding the company on invoices and other formal financial records (SAT).
The corporation’s legal representative carries this out. They will get the firm’s Registro Federal de Contribuyentes (RFC) or Federal Tax Identification Number. Keep this number handy because you’ll need it for every transaction you conduct
7. Register with SIEM
Businesses must register themselves with the National Business Information Registry (SIEM). The Department of Trade conducts the procedure.
8. Register with Foreign Investment Registry
If your business has foreign owner/s without permanent residency, you need to get registered with Foreign Investment Registry. Foreign business owner/s have to appear in person within 40 days to complete the process.
9. Establish a business bank account
You can access a business bank account once you get your tax ID. Your legal counsel should be able to offer advice. Your selection of provider could be influenced by the kind of company you are engaged in or the area you are based.
10. Deposit your original capital
Depositing your initial investment into your corporate account completes the registration process for a corporation in Mexico. You are prepared to conduct business when that has cleared up and if it complies with any restrictions established by your enterprise type.
Once the process is done, companies can start conducting business in Mexico. Companies should register themselves at the social security and National Worker’s Housing Fund for the employee hiring process.
How Much Does it Cost to Incorporate a Company in Mexico?
Acquire a reservation and license for the company’s name and register the notification of usage by consulting an international law firm in Mexico. The attorney will speak with and evaluate the Notary’s work for the founding document of your corporate entity. This helps acquire its enrollment on the Public Registry, attend and open a bank account for your corporation, and obtain the RFC after gathering all the information necessary for its implementation (this is a federal taxpayer registration).
These actions ensure your business is legitimately incorporated and prepared for operation in Mexico. Please be aware that the registration fees are determined by a tariff and paid to the Notary Public by us. To establish your corporation, you should budget $2,100 plus IVA tax of 16%. To get started, you have two payment options: PayPal or a money transfer to a Trust account.
Type of company
Tax resident LLC
Export processing zone company
Branch of a foreign company
Holding company LLC
LLC with employment visa
Are Foreigners in Mexico on Certain Passes Allowed to Start a Business in Mexico?
In Mexico, foreigners are permitted to fully own businesses. Therefore, a foreign investor doesn’t need to be a Mexican national. Setting up a business in Mexico doesn’t even require a visa. But you’ll need to get an immigrant visa if you want to operate for your Mexican company. Certainly, you may start a business without ever setting foot in Mexico.
Nevertheless, you are most welcome. You only need to execute a power of attorney (supplied the draft to you), have it legalized (to make it internationally enforceable), and email it to us. This way, we can launch your company in Mexico on your account.
Government Assistance for Foreign-owned Businesses
To attract international investors, the Mexican government has undertaken actions, including providing tax, labor, and trade incentives.
- The Manufacturing, Maquila, and Export Services Industry (IMMEX) Programme, for instance, is one of many initiatives the Department of Economy has developed to encourage FDI and provide tax incentives.
- Companies with an approved IMMEX program can provisionally acquire the raw materials, machinery, and infrastructure needed to make export-ready products. The program’s principal advantage is that entrepreneurs can combine import statements and postpone taxes on items that are transiently brought into Mexico.
- Programs for Industry Sector Advancement (Programas de Promoción Sectorial) (PROSEC). This system of duty reduction permits the importation of particular raw materials, machinery, and equipment at favorable tariff rates, irrespective of origin. PROSEC rates are typically around 0% and 5% and are given with the requirement that program members only manufacture a specific set of completed goods (in 22 industries).
- Certification for VAT and excise taxes. Under this scheme, importers are eligible to receive a tax credit equal to the total amount of the tax rate that was in effect at the time of importation.
- Certification by AEO. The WCO-SAFE Framework of Standards, recognized in the private sector, is used in the Authorized Economic Operator program, which aims to enhance the international trade supply chain while paying assistance to member companies. The certification program seeks to increase taxation, customs, and security compliance. The certification as an AEO has significant advantages for importing and exporting businesses. These include a decline in custom recognition compared to a 10% increase in customs efficiency and reduced time and cost due to the utilization of a fast lane.
- Authorities also believe that the risk and likelihood of being monitored in overseas trade are low. Several customs facilities and procedures are connected to, among other things, customs clearance, rectification, and self-correction operations.
- Federal programs are available to reimburse import taxes or VAT in specific circumstances, which is advantageous for businesses that export goods (for example, Drawback). Programs run by local and state governments also vary by region.
- To encourage investment and the sale of goods made in Mexico, Mexico has negotiated 14 free trade agreements (FTAs) with over 50 countries, including the EU and Japan in response to the current USMCA with the US and Canada.
- In the case of expropriation, regulatory confiscation, and disputes involving their interests, foreign investors are afforded the same security (national treatment) as domestic companies under Mexican law.
How Multiplier Can Help?
In a foreign nation, starting a new business can be rather daunting. The foreign government may reject your business plan if you don’t follow the tax laws and other rules and regulations. To ensure the minor details of starting a company are taken care of, Multiplier can serve as a PEO.
The in-house professional staff at Multiplier is knowledgeable about local laws, registration procedures, and taxes in any nation where you plan to establish your firm.