How to start a business in Mexico

Mexico has the 15th largest economy on the planet, powered by a population ranked by the OECD as the hardest working in the world in terms of annual hours worked. It’s no surprise that many overseas entrepreneurs choose to set up a new business in Mexico.

If you're thinking of moving to Mexico to start a new enterprise, then you'll need to know a few basics to get started. Read this guide to help you on your way.

What types of corporate entities are there in Mexico?

There are several different options when it comes to establishing your business in Mexico. With very few exceptions, all of these corporate structures can be used by foreigners as well as Mexican citizens:

• Sole trader
• Limited liability stock corporation (S.A, or S.A. de C.V)
• Limited liability corporation (S. De R.L.)
• Partnership (general SNC or limited SCS)
• Branch of an already established business

As a sole trader you take on all the liability of your business personally. You must register your activities for tax purposes, as a ‘persona física con actividad empresarial’.

The S.A. structure is like a public limited company, with fixed capital. If you want this structure but with variable capital, then the S.A de C.V offers this option. This is a common choice for entrepreneurs coming to Mexico to start a business. There's a minimum capital requirement but this doesn’t have to all be paid initially, and shareholder liability is capped at the amount they invest.

Limited liability corporations are also popular with foreign investors, and again limit the tax and debt liability faced by their founders. This type of business must be founded by at least two people and is taxed at corporate tax rates.

Partnership structures in Mexico are similar to elsewhere in the world. You can choose a ‘general partnership’ in which the partners take on full liability, or a ‘limited partnership’ in which tax and debt liability is capped. In either case it's important to have the partnership agreement drawn up properly to ensure that you get the maximum benefit from this structure.

Choosing your company structure is an important step, and it’s a good idea to take legal advice to make sure you make the right choices for your enterprise.

Things to know before getting started

You can compare the administration needed to start a business in Mexico’s capital, with that in other countries, on the website of the World Bank's 'Doing Business' report. This helpful site summarises some of the main legal and bureaucratic steps you'll need to take when starting your new venture.

Registering a business in Mexico requires several separate stages, and there are fees to pay along the way. Expect to have to present yourself and your documents in person to several different authorities.

The fees incurred will vary slightly depending on the company structure. It's not possible to avoid notary fees, which will be in the region of MXN 1000, along with registration fees. Registering an S.A. structure business will cost you around MXN 1600.

Because all documents and submissions will be made in Spanish, it can be easier to have an agent work with you during the registration process, or ask your notary to support the full process. As your notary will be a very important ally in the process of setting up your business, be sure they're someone you trust and who you work well with. Take some recommendations from others before choosing the right notary for you.

What’s the company registration process in Mexico?

To register your company in Mexico you'll first need to find a notary to help you draw up and certify the most important documents.

The first step is to select and register your company name. This can be done online and shouldn't take more than a couple of days. The website for registration is in Spanish, so getting local help, or working through your notary might make the process run smoother.

Your notary will then draw up the deed of incorporation, which will be prepared in Spanish. This document holds all the important details of your business, such as the names and addresses of shareholders, the business you intend to carry out, and the company name. Usually the description of your business activity is worded deliberately loosely to allow for your business to grow and evolve over time without requiring changes to be made to the register.

All of the company founders will then need to sign the deed of incorporation in front of the notary. Each will provide:

• Proof of ID and right to be in the country (such as a passport and valid visa)
• Proof of address (usually a recent utility bill)

The notary will then register the business with the local authorities, and retain a copy of the deed of incorporation for reference.

Finally you'll need to register with the National Business Information Registry which is controlled by the Department of Trade. If you’re a foreign business owner without Mexican residence then you might also need to register with the Department of Trade Foreign Investment Register. Your notary will be able to advise you about the necessity of this step.

Legal obligations and responsibilities

As the owner of the business, you or another one of the named directors will need to register with the tax authorities (SAT). This can be done at your local office, where you must present your photo ID and visa, a certified copy of the deed of incorporation, and proof of the address of your business (such as a utility bill).

Some types of business in Mexico must obtain a permit to trade legally. If you’re serving the public directly (in a shop or restaurant for example) then you might also have to register your enterprise with the local government.

If you intend to employ people in your business, you’ll have to register with the Mexican Social Security Institute (IMSS) and the National Workers Housing Fund (INFONAVIT). This can be done in the branch of the IMSS closest to the place your business is registered. Once you’ve registered, you can use the IMSS online systems to conduct most of your business with them online. However, the website is provided only in Spanish so you may need to find a friend or translator to help you.

Where can I find help to start my business in Mexico?

There's help on hand if you're starting a business in Mexico. Chambers of Commerce which are working to promote links between your home country and Mexico are a great place to start. Here you'll find others who have already taken this path and who can help with connections and recommendations. Alternatively, an organisation such as Startup Mexico might be helpful to you.

The most important thing you can do to promote your business is get out and meet people. Once you’re in Mexico and ready to get going, look for local networking events on sites such as Meetup, Eventful and Eventbrite. Here you can meet like minded people and build your customer and business contact book.

With some planning, and a little help from your new network and friends, your business will get off to a flying start.