Whether you’re eager to establish a base in a new market or you’re hoping to hire skilled international talent, Mexico’s local incentives, bustling economy, and optimal geographical location make it a promising country to expand your company. Global expansion is complex — navigating various Mexican laws, enforcing contracts, and understanding corporate taxation may consume your resources or extend beyond your company’s area of expertise.

Learn more about the requirements of business formation in Mexico and how an Employer of Record (EOR) can help.

Why do business in Mexico?

Mexico’s overall ease of doing business across its 32 states is 72.4 percent. Most of the country’s gross domestic product (GDP) is from the services industry, but other profitable sectors include:

  • Mining
  • Tourism
  • Tobacco
  • Petroleum
  • Chemicals
  • Electronics
  • Motor vehicles
  • Food and beverages

There is no minimum capital required to do business here.

 

Some advantages of doing business in Mexico include its:

  • Optimal location: Mexico is on the southern border of the United States, granting access to both the U.S. and Canadian markets as part of the United States-Mexico-Canada (USMCA) trade agreement. In 2019, approximately 80 percent of Mexican exports were sent to the U.S.
  • Large labor force: Mexico has a large labor force totaling 50.9 million as of 2020, with over 61 percent of that being in services. The labor force is diverse, including individuals with backgrounds in skilled industries or higher education degrees.
  • Local incentives: Many local governments offer incentives — including tax reductions and reduced costs for some purchases and services — depending on your industry and location.

Challenges associated with registering a company in Mexico

While expanding to and hiring in Mexico is a profitable venture for most companies, the process isn’t always straightforward. These are some of the challenges associated with international company registration in Mexico:

  • Laws and regulations: While international entities aren’t subject to regulations, some sectors require specific licenses. There are generally no restrictions on foreign investments, except for certain industries, like the postal service, electricity, and currency. Specific business, tax, licensing, and employment laws vary across each of Mexico’s states, which may cause some confusion if you’re hiring in multiple markets. You must abide by all Mexican laws when conducting business or hiring locals.
  • Complex business taxes: Mexican businesses are subject to six tax payments throughout the year, which may take more than 240 hours annually to complete. Additional state and municipal taxes apply.
  • Lengthy property registration: If you plan to build or renovate an existing property to house your new branch or business, construction and building permits can accrue hefty fees. Registering a property takes 22 days on average, assuming your project meets all requirements for permits, including the Public Registry of Property of the Federal District and local zoning authorities.

How to register a company in Mexico

If your company plans to work with someone in Mexico to register your business and act on your behalf, you will likely need to go through a power of attorney (POA) first. An international POA is a legally recognized attorney who can act on your company’s behalf to sign official documents and bylaws in Mexico. This means you don’t have to spend time or resources traveling back and forth while you establish your company. However, a POA cannot help you hire local employees or understand labor laws.

Mexico is not an at-will employment country, and all employment relationships require a contract. Though written contracts are not mandated, they are the best option for both employer and employee because they establish clear rules and allow each party to negotiate and ask questions. Employment contracts are indefinite, project-based, or seasonal — most fall within the indefinite category.

All corporate entities also require official bylaws. Official bylaws establish which powers each shareholder or officer holds and the extent of those powers. They also determine the decision-making process, including the hierarchy of directors or owners involved in responsibilities like property sales, bank account management, and employee management. Every company is responsible for holding an annual shareholder meeting to consider financial statements. Public companies will then file those results with the National Banking and Securities Commission and other relevant parties. Private companies do not have to share their findings publicly unless involved in legal litigation or similar procedures.

Here’s how to register a company in Mexico.

1. Define the business structure

Your business structure determines how your company operates and manages finances. Options in Mexico include the following:

  • Limited liability stock corporation: Stock corporations, or sociedad anonima (S.A.), can be fixed capital, varied capital, or both. Fixed and combination business structures require a minimum startup capital. Company ownership is demonstrated through capital shares, and shareholders are limited to their own contributions.
  • Limited liability company (LLC): LLCs, or sociedad de responsabilidad limitada (S.R.L.), have minimal capital requirements and limited partner options. Ownership does not include negotiable certificates.
  • Civil enterprise: Civil enterprises, or sociedad civil (S.C.), are reserved for civil professionals and have no limit on partnership options and require no minimum capital to start. Every individual involved is jointly responsible for their incurred debt.
  • Branch: A branch, or sucursal, must be first approved by the National Commission of Foreign Investment and Secretariat of Foreign Affairs. Branches are for commercial activities and offer a limited presence.
  • Subsidiary: Subsidiaries, or subsidiarios, are legal entities separate from the parent company that establishes them. They have their own rights, responsibilities, and capital shares assigned to stockholders.
  • Representation office: Representation offices are for international companies that plan to establish themselves in Mexico in the future and need a representation office to assist until then. Companies that use this structure are limited to certain activities and can’t yet participate in commercial operations.

2. Register the company name and trademarks

Your company’s legal name must include the words or the abbreviation that indicates your business structure. Once you’ve decided on your name, you need to register it with the Ministry of Economy and Public Registry of Commerce. If you work with intellectual property (IP), register the IP and seek the necessary trademarks with the Mexican Intellectual Property Institute (IMPI).

You need the following information and documentation before registering your trademark in Mexico:

  • The trademark logo or design, if applicable
  • The company and applicant name and nationality
  • The full date of the trademark’s first use in Mexico, which you may be asked to provide documentation to support
  • A physical address, not a post office box address
  • A complete list of services and products that your registered trademark will apply to
  • An apostilled copy of your company’s Articles of Constitution
  • Payment for a fee — the amount varies depending on the agency you register through

Trademark registration can take up to nine months, and you must file all renewals no later than 10 years from the original grant date. Mexican law does not recognize certification marks.

3. Create Articles of Incorporation

All companies must create Articles of Incorporation, which include:

  • Your company name
  • Your company’s physical and operating addresses
  • Your notarized company bylaws
  • Your company’s mission statement
  • Your corporate purpose
  • Relevant shareholder names
  • Your business structure

All documents need apostille certification, which includes legal notarization, and may also require official translations.

4. Apply for a company tax ID

Obtaining your tax ID number is one of the most critical steps of company registration in Mexico because, without it, you cannot open a business bank account, hire employees, make required monthly tax declarations, or conduct your business. Company tax ID numbers are known as Registro Federal de Contribuyentes (RFC). Company RFCs are 12 characters long and contain both letters and numbers.

You don’t have to be a Mexican resident to get an RFC, but you do need proof of a fiscal address. You also need to prove your company is incorporated and you are the person legally authorized to file for the RFC. Visit the Mexican treasury website to start the application and submit the required documents.

5. Register for social security and National Worker’s Housing Fund

Before you can hire employees and calculate income tax amounts, you must register your company with the social security program. You have to make social tax contributions to the Mexican Institute of Social Security (IMSS) for employee medical services, accident compensation, disability pension, and maternity leave.

You must also pay 5 percent of each employee’s base salary to Instituto del Fondo Nacional de la Vivienda para los Trabajadores (INFONAVIT) as part of your required contributions to the National Worker’s Housing Fund, which supplies government housing assistance for Mexican workers.

Working with a global Employer of Record (EOR) is the best way to ensure your company meets all legal requirements for hiring and paying employees, including which social security and benefits your employees are entitled to.

Opening a business bank account in Mexico

All companies need a Mexican business bank account for taxes. Make sure you apply for and receive your company’s tax ID information before applying for a bank account. Each financial institution has its own requirements for opening a new account, and the process can take up to three months to complete. Check with your bank for a complete list of required documents and account guidelines.

To start, you will likely need one or more copies of the following:

  • Articles of Incorporation
  • Official ID
  • Valid passport
  • Work visa or investor’s visa
  • Current proof of address
  • Tax ID number
  • Shareholder, investor, and partner information
  • Personal and business references

Banks also require a minimum starting deposit for business accounts. The amount varies between institutions. If you are not your company’s legal representative, you also need legal documentation certifying that you can sign financial and account documents for your company. Most banks require in-person meetings to sign all legal documents physically.

Challenges when hiring employees in Mexico

Whether you’re hiring local talent to fill openings in your new location or hiring remote employees from Mexico, employment laws can be challenging to understand and navigate quickly. An EOR can help by taking control of international hiring, payroll, and human resource management.

1. Understanding immigration options

Mexico is one country that incentivizes remote employment through its temporary resident visa program, allowing international visitors to live in Mexico for a year or longer while engaging in remote employment. You might not have to worry about immigration policies, depending on your employment contract and employee location.

If you do, immigration options include:

  • Temporary resident for remunerated, or paid, activities
  • Temporary resident for non-remunerated, or non-paid, activities
  • Visitor visa for remunerated activities
  • Visitor visa for non-remunerated activities
  • Long-term visitor visa for non-remunerated activities

Immigration processing takes anywhere from a few days to a few months and requires documentation, including:

  • Passports
  • Legal IDs
  • Current photos
  • Residence permits
  • Resumes
  • Education certificates and degrees
  • Employment contracts and offer letters
  • Proof of accommodation and return itineraries
  • Corporate tax and formation documents

2. Navigating cultural differences

A critical and challenging part of establishing your business and hiring in a new market is navigating cultural differences across countries, states, cities, and towns. Languages, changing employment laws, customs, and traditions are an important part of running a business, and missteps can create confusion or have unintended consequences.

For example, Mexican labor law does not require unemployment insurance, but your company may need specific permits depending on the state where you’re establishing your company and your industry.

3. Working with labor unions

Mexico recognizes labor unions under the Federal Labor Law. While labor unions are in place to protect employees and negotiate fair contracts, many companies need assistance in unfamiliar industries or when initiating cross-border working relationships. Labor unions are especially challenging if you don’t have a specialist on your team who is familiar with the Spanish language and Mexican labor law.

All companies with a presence in Mexico should analyze new and existing Collective Bargaining Agreements (CBAs) to ensure they uphold the new labor law changes that occurred after Mexico’s Federal Labor Law was adjusted in 2019.

Fast facts to know before expanding your business to Mexico

Now that you know how to expand a company to Mexico, here are some fast facts to remember as you navigate business dealings, corporate documentation, and hiring local employees:

  • Mexico’s full name is the United Mexican States.
  • Mexico is the 10th most populous country in the world, with a population of about 130 million as of 2021.
  • Mexico City is the capital of Mexico.
  • Spanish is Mexico’s official language and spoken by 92.7 percent of the population. Mexico also recognizes 68 indigenous languages, including Mayan and Mixtec. With 1.7 million people fluent, Nahuatl is the second most spoken language after Spanish.
  • Mexico is the 17th-largest global exporter, with the top three exports being vehicles, computers, and telephones.
  • Official Mexican currency is the Mexican Peso, abbreviated as MXN and symbolized as either $ or Mex$.

Globalization Partners can help you establish your company in Mexico

International expansion and hiring are complex processes, but you’re not alone. Globalization Partners is a global EOR with a presence in Mexico and 187 other countries. We make expansion and international hiring simple. With just a few clicks, you can use our comprehensive platform to hire and onboard employees and set up payroll. We ensure you’re complying with Mexico’s employment laws, so you can focus on growing your business.

Request a proposal or contact us today to learn more.

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