Mexico, officially known as the “United Mexican States,” is a federal republic situated south of the United States. Its borders face the Pacific Ocean on its west and southern sides. Belize, Guatemala, and the Caribbean Sea borders Mexico on its southeast side. The Gulf of Mexico borders its eastern side. Mexico has a large land mass covering over 760,000 square miles (nearly two million square kilometers). It has an estimated population of over 120 million making it the sixth largest country in the Western Hemisphere and the 13th largest country in the world.
Mexican corporate laws include their Foreign Investment Law of 1993 and the North American Free Trade Agreement (NAFTA). Mexico has an open door policy towards foreign investors.
Benefits
There are several benefits to foreigners choosing to incorporate in Mexico. These benefits include:
• Efficient Registration: While the complete process to incorporate in Mexico can take up to three weeks, everything can be accomplished without having to visit Mexico.
• Two Shareholders: Only two shareholders are required to form a Mexican corporation. They can be from any country and do have to be residents of Mexico.
• No Minimum Capital: There is no minimum paid-up capital requirement for corporations in Mexico. However, typically corporations declare around $3,000 USD as their capital value. Apparently, the Mexican Public Registry of Commerce will complete and accept the company’s incorporation registration faster with a minimum declared value of at least $3,000 USD. The declared capital can be in U.S. Dollars instead of Mexican Pesos, making it more convenient for Americans.
• Free Market: Mexican corporations owned by foreigners can conduct business in nearly every industry in Mexico.
• No Withholding Tax on Dividends: Withholding taxes on foreign dividends can often be waived in Mexico.
• No Currency Exchange Controls: Mexico does not impose currency exchange controls on foreign entities.
• No Import/Export Controls: The Mexican government does not impose foreign import/export controls on foreign goods or services.
Corporate Name
New corporations must select a corporate name which is not similar to other Mexican corporations. The Secretariat of Foreign Affairs authorizes the use of a corporation’s name in Mexico. It is recommended to offer three corporate name options when applying for registration as a corporation so if one or two are rejected due to name similarity; the third option can be approved for faster registration.
The company incorporation process must take place before a Notary Public once approval for the corporation’s name comes through from the Ministry of Foreign Affairs.
Corporate Name
New corporations must select a corporate name which is not similar to other Mexican corporations. The Secretariat of Foreign Affairs authorizes the use of a corporation’s name in Mexico. It is recommended to offer three corporate name options when applying for registration as a corporation so if one or two are rejected due to name similarity; the third option can be approved for faster registration.
The company incorporation process must take place before a Notary Public once approval for the corporation’s name comes through from the Ministry of Foreign Affairs.
Office Address and Local Agent
Corporations must appoint a local registered agent. In addition, the corporation must have a local office address to accept official notices and service of process. However, the main corporate office can be anywhere in the world.
Shareholders
At least two shareholders are required for incorporation with a maximum of 50 shareholders. Shareholders can be either private individuals or legal entities.
Directors and Officers
One to two directors are required to incorporate. Typically, directors are responsible for company management. Either a board of directors or a general manager completes the company administration structure.
Authorized Capital
The minimum capital for Mexican corporations is established by its board of directors.
Taxes
Mexican corporations pay a corporate tax rate of 30% on their profits after allowed deductions.
Annual Fees
Corporations pay an annual renewal fee of $1,500 USD which covers government registration and Tax Permits obtained from Hacienda (covering taxes), the State Registry, the Department of Commerce, the Chamber of Commerce (based on the company’s industry), an import/export permit, the SIC code data base permit, and the Department of Immigration.
Public Records
Public records of corporations can be kept private if the corporation chooses to appoint nominee shareholders and directors. The Articles of Incorporation for the corporation is normally the only public record document.
Accounting and Audit Requirements
Every corporation must appoint what is known as a Board of Surveillance. This board is made up of two or more statutory auditors. The auditors must monitor the administrative actions of the corporation and ensure that both the directors and stockholders are protected.
An annual report must be prepared by either the director or the sole administrator and must be approved at the annual stockholder’s meeting. The report must detail the corporation’s progress during the fiscal year, company policies, existing projects, principal accounting policies, a declaration of how the financial information was prepared, and a declaration demonstrating the company’s financial situation at the end of the fiscal year.
Annual General Meeting
Corporations are required to have an annual general meeting. Typically, there is a meeting of the stockholders who are the governing body of the corporation which approves the transactions and finances put forth by the Board of Directors, or the individual company administrator.
The annual shareholder’s meeting is normally held at the corporation’s main office.
Time Required for Incorporation
Expect the entire process to take about 3 to 4 weeks. This time table depends on how complete the corporate paperwork is upon registration, as well as the turnaround time for approval from the government registry.
Shelf Corporations
Shelf corporations are available in Mexico for faster incorporation.
Conclusion
Mexican corporations offer several benefits including only two shareholders, low cost registration and renewal fees paid in U.S. Dollars, freedom to conduct virtually any type of business in Mexico, a flat 30% corporate tax rate, the authorized capital is established by the board of directors, and privacy is afforded by only having to make the Articles of Incorporation a public record and the option to appoint nominee shareholders and directors
