Starting a Business in Mexico as a Foreigner

Are you considering moving to Mexico to start your own business? Mexico’s emerging economy is a fantastic option to start your business, whether you plan on working independently or taking advantage of the country’s extensive talent pool.

Today, we will dive into the important details you need to know before starting a business in Mexico as a foreigner. So, get ready to explore everything you need to know, from the costs of opening a business in Mexico to government regulations. Let’s get started!

Can I Start a Company in Mexico as a Foreigner

Starting a business in Mexico as a foreigner can seem like a never-ending puzzle, and it gets even more difficult when obeying the regulations of a new country. The good news, however, is that for the most part, you don’t need a business partner as foreigners can start and run their own companies in Mexico. 

There are some exceptions to this depending on the type of business you plan on opening. Some activities are restricted for foreigners meaning they may have to give a specified percentage of the company to a Mexican national. For a comprehensive list of restricted activities for foreigners, be sure to reach out to our team specializing in Mexican regulations.

3 Benefits of Starting a Business in Mexico

There are many reasons you may be interested in opening a business in Mexico, from the strategic location to the lower labor costs. Let’s discuss the top 3 benefits of doing business in Mexico.

Strategic Location

Mexico’s geographical location means it has easy access to the USA and Canada, proving a perfect location for those who need easy access to the North American market. The United-States-Mexico-Canada Agreement (USMCA) allows for reduced trade restrictions between the nations, making Mexico an even more attractive location to set up a business.

Favorable Business Environment

Mexico has implemented reforms and initiatives to attract foreign investment and create a favorable business environment. The government has established free trade agreements with numerous countries, providing access to a broad market and facilitating trade. Additionally, Mexico offers a stable political climate, intellectual property protection, and a robust legal framework that supports business growth and investment.

Cost Effective, Talented Labor

In comparison to other countries, Mexico offers competitive labor costs for employers. This makes Mexico attractive for manufacturing and outsourcing operations in particular. In addition, Mexico has seen a huge increase in entrepreneurship and innovation lately, so foreign entrepreneurs can tap into the talent pool that has been growing over recent years.

These are just a few of the benefits of starting a company in Mexico as a foreigner and there are many more. By now, we think the idea sounds enticing to you, so let’s move on to the finer details of opening a business, starting with the types of company you can set up.

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Starting a Business in Mexico: Common Types of Companies

As you may know, there are multiple options for starting your business in Mexico as a foreigner. Each has different legal obligations and set-up costs. Let’s take a look at the difference between Representative Offices, Branches, and Subsidiaries.

Representative Office

If you are not immediately planning on generating income in Mexico, setting up a representative office may be for you. This is ideal for conducting market research, or even exploring the business environment in Mexico. You can set up a representative office as long as you are not engaging in financial transactions.

Branch

By setting up a branch, you have an extension of your foreign company, which is allowed to carry out business activities and generate income. A branch operates under your foreign company’s legal umbrella, without the need for a separate legal identity in Mexico.

Since branches do not have a separate legal personality, local authorities and third parties are unused to dealing with this kind of entity.

Subsidiary

If you plan on having a more permanent presence in Mexico, you can either incorporate, invest, or acquire a subsidiary. This entity will operate independently, allowing full commercial and legal transactions within Mexican regulations. This tends to be the preferred approach for foreign companies aiming to make a significant impact in the Mexican market.

Starting a Business in Mexico: Step-By-Step Process

Now that you have decided to get going on starting your business in Mexico as a foreigner, let’s take a look at the steps involved, from choosing a legal entity, to registering with the state tax authority.

1. Choosing your Legal Entity

Before starting a business in Mexico, it’s vital that you decide on the most suitable structure for your company.There are various types of companies in Mexico to choose from, based on your business nature, number of initial investors, and management plans.

2. Secure your Company Name

After deciding on your legal entity, you’ll have to ensure that your desired company name is available in Mexico and that it complies with Mexican regulations. The name must not infringe on trademarks or registered names and must not be in use by another company.

3. Identify the Ultimate Beneficial Owner (UBO)

To comply with anti-money laundering regulations, you must identify the UBO of your company. This includes individuals who own or control the company, whether directly or indirectly, and you may have to provide passports and identification for proof.

4. Determine the Structure of Foreign Investment

If your company involves foreign investment, you’ll have to outline how the investment will be structured. Be sure to include the percentage of foreign capital, restrictions or limitations, and clauses related to the admission of foreign capital in your company’s bylaws.

5. Draft and Notarize Incorporation Documents

Next up, you must prepare the necessary incorporation documents. This includes company bylaws, articles of incorporation, and any additional agreements or contracts. All of these documents must be drafted in line with Mexican corporate law and notarized by a Mexican notary public to be valid.

6. Register with the Public Registry of Commerce

After notarization, it’s time to register your company with the Public Registry of Commerce (Registro Público de Comercio). This officially establishes your company’s legal existence and provides public notice of its formation.

7. Obtain Tax ID and E-Signature

To register a company in Mexico, it is a legal requirement that you establish a fiscal address within Mexico and register your company before the Mexican Tax Authorities (Servicio de Administración Tributaria) to obtain your Tax Identification Number (RFC) and an electronic signature. These can only be obtained by a Mexican or foreign and are essential for tax compliance, invoicing, and conducting business transactions within Mexico.

8. Open a Corporate Bank Account

Now it’s time to choose a bank in Mexico to open a corporate bank account in your company’s name. This account must be used for financial transactions, payroll, tax payments, and more. You must ensure that the bank account is opened by a legal representative with the authority to open and manage the account.

9. Register with the National Registry of Foreign Investments

If your company will be engaged in foreign investments, you must register with the Registro Nacional de Inversiones Extranjeras. This registry tracks foreign investment in Mexico and ensures compliance with investment regulations.

10. Enroll with the Mexican Social Security Institute

If you plan on hiring employees, you’ll have to register your company before the Mexican Social Security Institution. This submission simultaneously triggers the company’s application and registration before the National Worker’s Housing Fund Institute . This provides access to healthcare, retirement benefits and other social security benefits for your employees.

11. Register with the State Tax Authority

Finally, it’s time to register with the Local Tax Authority in the state that your company operates in. This allows you to comply with state-level tax obligations and allows you to conduct business legally within your jurisdiction.

12. Register the Company before Local Authorities.

Depending on the activity, the company may not have to register before local authorities depending on its location and activities. Depending on whether the activities have an “impact” on the local community a permit or license may be required.

By following these steps, as well as seeking assistance from legal professionals along the way, you can begin your path to operating a business legally within Mexico.

Frequently Asked Questions About Starting a Business in Mexico as a Foreigner

Do I need a Legal Representative to start a company in Mexico?

Yes, you need a Legal Representative to start a company in Mexico. This person acts on behalf of the shareholders of the company and is responsible for representing its interests in legal matters during the implementation of the bylaws.

How much does it cost to start a business in Mexico?

Starting a business in Mexico incurs various costs, including registration fees, legal expenses, and initial capital investment. Costs can vary widely depending on factors such as the business structure and industry.

How long does it take to open a business in Mexico?

Opening a business in Mexico typically takes a few weeks to a few months. This depends on several factors such as the legal structure and the regulatory requirements. Working with professionals experienced in opening businesses in Mexico can help streamline this process.

Can a foreigner own a business in Mexico?

Yes, a business can be 100% foreign owned by either legal persons (“legal entities”) or natural persons (“individuals”). However, Mexico prohibits or restricts foreign capital in certain activities or economic sectors. Needless, most economic sectors are not subject to foreign investment controls or restrictions.

Conclusion: How Lexidy Helps Foreigners Set Up a Business in Mexico

Starting a company in Mexico is an exciting opportunity to explore markets in North America and further. Setting up a business can be a complicated process, especially when navigating a new region with different laws and processes to your own country. In addition, collecting the necessary documentation for visas before you set up your business can lead to added stress.

The good news? Our team is here to help! Our team specializes in helping foreigners obtain their Mexican visa and helps guide them through the various processes of setting up a business.No matter what your reason is for starting your next business venture in Mexico, the legal eagles at Lexidy are on hand to guide you through the process. So be sure to reach out to our Mexico Corporate Department to get your free case consultation today!