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Corporate and legal implications of doing business in Mexico




All countries have different requirements to open a business. Here are the basic facts to take into consideration when trying to do business in Mexico.

 

Type of Legal Entity

Companies doing commercial activities can incorporate different types of legal entities. The most common is a “Sociedad Anónima”, which requires a minimum of two shareholders with no minimum of capital stock issued. Shareholders will mostly limit their responsibility up to their capital contribution (as long as the company complies with its basic tax obligations).

Many foreign investors chose a different type of legal entity, a “Sociedad de Responsabilidad Limitada” (equivalent to a Limited Liability Corporation) because it is considered as “transparent” in their countries’ tax systems.

Business can also be done as individuals, but the requirements are mostly the same as for companies with no added benefits.

Legal entities must be incorporated before a notary public, who will inform the tax authority and register the new corporation before the Public Commerce Registry. The process can take up to a month with additional requirements to be met before being able to start the business.

 

Bank Account

The newly incorporated company will require a bank account, and this process takes at least two additional months. There no more than 35 registered banks in Mexico, of which only a few operate at the national level. With so little competition, the service received from banks is less than optimal. Furthermore, with new antilaundering money rules, banks are very conservative when accepting new clients. Bureaucracy in banks is also common, so be ready for a cumbersome and frustrating process. Being recommended by an existing bank client helps, specially if it’s a customary client. The bank account is compulsory since all taxes must be paid through the bank account; also, deductible expenses must be traced to that account. Payroll is normally dispersed through the bank account and it is common for employees to be account holders in the same bank.

 

Legal Address

The newly incorporated company will require a business address, which will be registered before the tax authority. This address is where all legal notices be received and where accounting records must be kept.

 

Electronic Billing

Companies in Mexico must bill their products or services electronically. All bills are created with the customary legal requirements, including fixed codes for products and services obtained from a huge strict catalog, and pass through the tax authority’s servers before reaching the clients. This helps the authority to track the income and goods billed by the supplier and the expenses deducted by the purchaser. Payroll is also electronically billed so the authority can track employees’ income and the taxes withheld by the employer. It is a very efficient way to control taxpayers; but with a very demanding process for companies.

 

Electronic Bookkeeping

Companies doing business in Mexico must keep their accounting records electronically and file monthly trial balances to the tax authority. So, besides the regular monthly and year-end tax reports that companies must file, the authority will receive twelve trial balances with the company’s records. Talk about monitoring taxpayers.

 

These are the most basic requirements when opening a business in Mexico. As you can conclude, Mexico does not stand out as an easy place to start your business, mostly due to bureaucratic requirements. We can help you find your way and ease the process. Let us know if you need assistance.