Starting a Business in Mexico: The Ultimate Guide

One of the greatest advantages that Mexico has is the proximity to the US. Besides being a good idea for companies to move a part of their operation to the country in order to lower their operational cost, there are a set of advantages for one-man companies, SME’s and even retired professionals that would like to start a business.
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Mexico is a great place to start your business. Certainly, for manufacturing businesses, Mexico is one of the most attractive places. Since it’s located right next to the United States it has a lot of logistical advantages.

Now is a great moment for manufacturing companies to get established in Mexico. Indeed the country is becoming a strategic manufacturing area. Firstly because of the trade war that’s going on between the US and China. Secondly, because of the disruptions in supply chains. And, thirdly, because of the rising cost of fuel and logistics.

Mexico is located right next to the US. Obviously, the US is the largest economy in the world. Therefore, both countries have developed a manufacturing synergy. Throughout the years, American companies have come and started operations in Mexico. Specifically, to lower their Manufacturing costs, labor being the highest one. It all started at the border. Imagine having a manufacturing company in San Diego, California. Let’s say you make shoes. You pay USD $7.25 per hour to your workers. Then you realize that about one mile away people charge USD $13, but for the entire day! Those are the current wages in 2022 by the way.

In response, the Mexican government developed policies to promote this synergy. Straightaway, the government created the IMMEX program commonly known as maquiladora. With IMMEX, companies can import raw materials without paying taxes, as long as they export the final product. This is a great incentive for manufacturing companies. As a consequence, a highly skilled workforce has developed in Mexico. Specifically in industries like car manufacturing, aerospace, medical devices, and electronics. 

But is not just manufacturing that the Mexican workforce is known for. Mexico is one of the top digital & creative economies of Latin America. Mexican creativity is known worldwide. Guadalajara, specifically, hosts companies like Cisco, Oracle, and Intel. This city has grown to be known as the Mexican Silicon Valley.  Basically, because of the huge pool of talent that has developed in it. So if you have a digital business like IT or software development Mexico may be a great option.

There are also a set of advantages for one-man companies, SMEs, and even retired professionals. Starting a business in Mexico can work for smaller operations too. In this article, for example, you can find the unbiased opinion of an American retiree.

We developed this guide to give clarity to anyone thinking about starting a business in Mexico. We divided it into four chapters. The first chapter gives a brief overview of the legal aspects of establishing a company. The second chapter walks you through the process of incorporating a company step-by-step. In the third chapter, we discuss immigration and the ways a foreigner can come to Mexico to live and work. The fourth chapter will give you a brief overview of Mexican labor law.

We certainly hope you find value in this guide. We make an effort to keep this guide updated. So if you feel there is something we should add to it, please leave a message in the comments.

You can use the table of content to navigate the guide.

Enjoy!

1. Opening a Business in Mexico: A Legal Overview

Starting a business in Mexico means you have to comply with the Mexican legal system. Obviously, this system is different than the one used in the United States. The US legal system is based on Common Law, a more dynamic system that gives more weight to judicial decisions. Mexico, on the other hand, has a legal system known as Civil Law. This system has its origin in the Roman legal tradition and a lot of influence from the French Napoleonic Customary Law. Therefore, Mexico’s legal system is very formal and bureaucratic. Hence, Americans may find it less agile. Certainly, it is true that, sometimes, legal procedures can get pretty convoluted. But don’t worry, we are here to help.

Because the system gives a lot of importance to formality, the legal figure of the Notary Public is quite important. Although there are Public Notaries in the US, the figure in Mexico has a lot more weight and importance. In Mexico, a Public Notary is a law expert who the people (and the government) put trust in. As a result, many legal acts need to happen in front of them. We call this “formalizing”. Notary Publics formalize almost every important legal act that you perform in Mexico. If you purchase land or real estate, you need to formalize the act before a Public Notary. If you open a business in Mexico, you need to formalize the Articles of Incorporation before a Public Notary as well.

Can I Start a Business in Mexico as a Foreigner?

Sure you can! Foreigners can own 100% of a business in Mexico. Therefore, there is no need for a foreigner to partner with a Mexican citizen. In fact, you don’t even need a visa to start a business in Mexico. However, if you would like to work for your Mexican business, you will need to obtain an immigration visa. Certainly, you don’t even need to set a foot in Mexico to open your business. Although you are very welcome to come. All you have to do is sign a power of attorney (we sent you the draft), get this POA apostilled (A way to make it internationally valid), and send it to us. As a result, we can start your business in Mexico on your behalf.

Opening a business in Mexico is not hard. But, as a foreigner, the path you have to follow may not be obvious. But don’t worry, this guide will walk you through all the steps needed to start your business in Mexico. Evidently it will show you all of the legal and administrative aspects you must take into account.

There are many legal entities to start a business in Mexico. However, 98% of the time, it boils down to two options. The Sociedad Anonima, which is similar to the US Corporation (Corp.), and the Sociedad the Responsabilidad Limitada, which is similar to the US Limited Liability Company (LLC). If you believe that starting your business in Mexico requires a complex structure get in touch with us.  We will advise which legal entity fits better according to your needs. 

Sociedad Anonima: The Mexican Corporation

One way of starting a business in Mexico is to incorporate a Sociedad Anonima. This is the most common Mexican legal entity. It is the Mexican Corporation; the equivalent to the US Corporation. There is no restriction to the number of partners and you can increase or decrease equity as you please (within the limits established in the by-laws of course). And, the most important part, shareholders have their liability limited to their stock interest in the company. Awesome. Check out our article on Sociedad Anonima to see if this type of company fits your needs.

Sociedad Anonima Characteristics

  • Owners are called shareholders
  • It can have an unlimited amount of shareholders.
  • The shareholders have their liability limited to their stock interest in the company
  • The Board of Directors or Sole Administrator manages the company
  • May increase or decrease its capital stock
  • Shares are transferable and can be traded
  • A Statutory Auditor is mandatory

Sociedad Anonima Requirements

  • No minimum capital requirement
  • A minimum of two shareholders is required
  • Minimum of one Director (Sole Administrator)
  • A fiscal address
  • Appointment of a statutory examiner, a third party who supervises operations and represents the interests of the shareholders.
  • Mandatory shareholder annual meetings

Sociedad de Responsabilidad Limitada: The LLC in Mexico

Another way to start your business in Mexico is by incorporating a Sociedad de Responsabilidad Limitada. The S. de R.L. is the equivalent of the US Limited Liability Company. Just as in the S.A., partners have their liability limited to their investment in the company. This type of partnership has become popular among foreign companies; in particular, those who want to reduce their tax liabilities in the US. Besides, since a Statutory Auditor is not mandatory, its management is easier.

S de RL Characteristics

  • Owners are called partners
  • Partners’ have their liability limited to their investment in the company
  • Directors will be fully liable for the administration of the company
  • No requirement to appoint a statutory examiner
  • Shares in the company must not be freely transferable and cannot be traded publicly

S de RL Requirements

  • There is no minimum capital requirement
  • A minimum of two partners
  • Maximum of 50 partners
  • Minimum of one Director (Sole Administrator)
  • A fiscal address
  • Mandatory shareholder annual meetings

    2. The Steps To Open Your Business In Mexico

    Now you know which legal entity suits your business best. So let’s jump right into the process of opening your business in Mexico.

    The following are the steps to open your business in Mexico:

    1. Choose your Business Name
    2. Choose the governing body
    3. Shareholders information
    4. Incorporation before a Public Notary
    5. Public Property and Commerce Registration
    6. Federal Tax Payers Registration
    7. Open a Corporate Bank Account
    8. Social Security Registration

    1) Choose Your Business Name

    Firstly, the Mexican Ministry of Economy needs to authorize the name of your company. Therefore it is best if you come up with 4 or 5 names and list them in order of preference. With this list, we file for the registration of the name. Surely, they may all get accepted. But they may also get rejected. Hence, it is best to try to register a few in one go. It doesn’t matter if many get approved. Since the registration process takes about a week, this helps us save time.

    Conversely, if you go one by one, it may take a long time. Certainly, this is not your brand or commercial name. Rather it’s just the legal name of your company. Hence, you don’t really have to brainstorm a lot or get really creative. For example, a lot of people use a combination of their name’s and last name’s first syllables.

    2) Choose The Governing Body

    The Governing Body may be a Board of Directors with a minimum of two persons or a Sole Administrator. You could also appoint a secretary, treasurer, and president depending on the size of your operation. Once you elected the governing body, ask each of them for ID and proof of address of each. You will need it later on.

    3) Shareholders’ (Partners’) Information

    The company’s shareholders may be either individuals or other companies.

    Individuals

    If the shareholders are to be individuals, the only thing required is their full name, passport, and proof of address. They may choose to travel to Mexico or to incorporate through a power of attorney. If they travel to Mexico, it is important that they state that the main purpose of the visit is to perform business activities. They do this when they arrive in the country.

    If someone represents them, he will need to present an apostilled power of attorney and a copy of his passport.

    Other Companies

    If the shareholders are to be other companies, the Signing Officer will need to sign. He may choose to travel to Mexico or to incorporate through a power of attorney. Just like with individual shareholders. And it is also important that he states the purpose of the visit as business activities.

    For the legal representative, all you need is his full name, passport, and proof of address. If someone represents them, he will need to present an apostilled power of attorney and a copy of his passport.

    For the company, you will need the following documents:

    • Certificate of Formation / Articles of Incorporation (duly apostilled)
    • Certificate of Legal Standing
    • Bylaws (duly apostilled)
    • Appointment of Signing Officer / Representative with Power of Attorney (duly apostilled)
    • The ID of Signing Officer or Representative with Power of Attorney
    • TIN (Tax Identification Number)

     

    4)Incorporation Before A Public Notary

    Remember the Public Notary? well, now it’s time to go meet him. By now you should already have the name registered in the Ministry of Economy. And you should have gathered all of the documents needed to open up your company. Now the Public Notary will make it official. He will help you draft a constitutive act that contains the articles of incorporation and bylaws of the company. This document includes all the general aspects of the company: company name, business objective, type of company, administration, duration, etc. The company must issue registered share certificates, and the shareholders must be registered in the Company Stock Registry Book.

    5) Public Property And Commerce Registration

    Every company established in Mexico needs to be properly registered in the Public Property and Commerce Registry. It exists to maintain a public record of merchants. For this process you will require to present:

    The document of incorporation (Constitutive Act) 
    The Federal Tax Identification Number (RFC)

    6)Federal Tax Payers Registration

    Now you fully incorporated your company. The next step is to go to the Secretaria de Administracion Tributaria (SAT), the Mexican IRS. The legal representative of the company does this. You designated him in the constitutive act, the document of incorporation. He will obtain the company’s Federal Tax Identification Number, Registro Federal de Contribuyentes (RFC) in Spanish. You should keep this number close because you will need it for pretty much any transaction you make.

    7) Open A Corporate Bank Account

    You can do this before the Public Property and Commerce Registration. You just need a document from your Public Notary. However, it is really important that you perform that step. Otherwise, the company won’t be able to function. The legal representative may open the bank account. Basically, the process is pretty much the same as in any country. Here’s a good article about it and you can find one with different bank reviews and a lot of tips in this article.

    8) Social Security Mexican Institute Registration

    The last step is to register your business in the Social Security Mexican Institute, or Instituto Mexicano del Seguro Social (IMSS). It doesn’t really matter if you are the only employee in your company. This is mandatory since you need to make contributions to your social security account. Be careful, the government will sanction you if you don’t do this in a timely manner.

    3. Moving to Mexico: Immigration, Visas & Work Permits

    When starting a business in Mexico, it is a common thing to send an expatriate to manage and guide the company. Sometimes, the owner wants to come and manage the business himself.

    In either case, there are some legal aspects to take into account. Even though you may start your business from abroad, however, to come to Mexico and work is a different story. In this guide we will give you an overview of the Mexican immigration system and the status of expatriates and their families.

    The General Population Law and the Migration Law are the Mexican laws that establish and regulate the rights and obligations of foreigners in Mexico as well as their immigration statuses. If you are interested, you can purchase both of this laws in English here. Like in any country some permits and visas are harder to obtain than others.

    For starters let us understand the status of a foreigner in Mexico. A foreign in Mexico can be:

    • Non-immigrant: someone who comes to Mexico for a period of time and then departs. This can be a tourist, visitor or a student.
    • Immigrant: someone who has a permit to live in Mexico long term and plans to obtain the permanent residency. This can be a a professional, a freelancer, a family member, an athlete or artist.
    • Migrant: someone who has acquired permanent residency in the country.

    The Ministry of Interior is the government office in charge of granting foreigners visas and permits. Now that we know the different statuses for foreigners in Mexico, let us look at the different types of Visas and Permits they may apply for, according to their status.

    Non-Migrants

    Visitor Permit

    If you come for leisure or business, don’t plan to stay longer than 6 months (180 days) and you have a passport from a country that’s in this list of countries that don’t require a visa to enter Mexico, then you are in luck. All you need to do is complete the Visitors permit form, known as Forma Migratoria Multiple or FMM, and give it to the migration officer at the port of entry. If you come by plane, the airline usually distributes this among the passengers, however, since you are the type of person that’s always prepared and planning ahead, you will download beforehand in this link. But, if you are more the  improvise-as-you-go type, you can get it at the port of entrance too.

    When you give your filled FMM to the immigration officer he will hand you back a piece of it. You should keep this piece of paper safe because you are supposed to deliver it to immigration services once you leave the country. If you don’t do it, you may get delays when coming back to Mexico in the Future. For Fees, permit extensions and other questions, check out this article.

    This type of permit allows you to do things such as tourism, volunteering or studying. If you have a business or have business partners in the region you can attend business meetings. The only thing you cannot do is work. 

    Visitor Permit Requirements

    • Passport 
    • FMM filled with your information

    Tourist Visa

    Now if you hold a passport from a country that is listed in here, you are not that lucky. You require a tourist visa. It’s not the end of the world, you just need to contact the nearest Mexican consulate and request a tourist visa. Same as with the visitor permit it will allow you to stay in the country for up to 180 days and it will allow you to perform the same activities.

    Tourist Visa Requirements

    • Passport (valid for at least 6 months after you enter the country)
    • Two passport size photos
    • Proof of economic solvency that may be either:
      • Letter of employment (with salary)
      • Title deeds
      • Bank statements with monthly average of USD $2k
      • International credit card with a limit of at least USD $1k
    • Fee Payment of USD $36.00

    Immigrants

    Temporary Resident Visa

    Temporary resident visa, allows you to live in Mexico for up to 4 years, with option of renewal at the end. The first time you apply for this visa, it will be issued for one year. After the year has passed you can renew it for longer (up to 4 years).

    It is a long-term temporary permit that gives the holder the status of resident. It will allow you to come in and out of Mexico as you please. There are several categories of the temporary resident visa, according on what you are planning to do in Mexico. 

    This type of visa allows foreigners to work in Mexico if your are receiving your payment outside of Mexico. If you have a job offer in Mexico, the company or person for whom you will work, needs to apply for the visa.

    Now, it is a good idea to take into account that you need to apply for this visa outside of Mexico. Only in really rare circumstances you can get it while being in the country. So you should plan before coming to Mexico if you are staying for more than 6 months. But don’t worry, that is what this kickass page is here to help you with.  

    Temprary Resident Visa Requirements

    • Valid Passport or ID
    • Photo
    • To be a citizen in the country in which you are applying or be able to prove your legal status
    • Fee Payment of USD $220.00 
    • Documents to probe one of the following:
      • Economic solvency
        • Bank account with monthly average of USD $28,000 or monthly income of USD $1,750.00
      • Family bonds​​​​​​​
        • Married or living with a Mexican citizen or a foreigner with a temporary or permanent visa
          • Marriage certificate
          • Proof of domestic partnership
          • Documents proving the partners legal status
            • Birth certificate, ID or passport if Mexican citizen
            • Passport and visa if foreigner
      • Scientific research in Mexican waters
      • Title Deeds of property in Mexico
      • Proof of investments in Mexico

    Migrants

    Permanent Resident Visa

    This is the Cadillac of visas. It’s the equivalent of the American green card. It basically means that you can stay in Mexico as long as you’d like and you can work or do whatever you please (as long as it’s legal, of course). There is no need for you to start applying for a temporary resident visa and later on apply for the permanent one. It’s not like steps in a ladder. You can apply to the permanent visa from the beginning. But, as you can see by the requirements, the permanent visa is harder to get. If you are like really sure that you want to stay in Mexico for good or eventually   become a Mexican Citizen, you should start to develop your strategy to get a Permanent Resident Visa from the beginning.

    Permanent Resident Visa Requirements:

    • Valid Passport or ID
    • Photo
    • To be a citizen in the country in which you are applying or be able to prove your legal status
    • Fee Payment of USD $
    • Documents to probe one of the following:
      • Economic solvency
      • Being a retiree
      • Family bonds

    4. Mexico’s Labor Law: What you Need to Know

    If you are starting a business in Mexico, you will ned to hire employees. Mexican Federal Labor Law, which has its basis in article 123 of the Mexican Constitution, is the law that establishes and regulates Mexico’s labor laws and anything related to employment in Mexico. The Mexican Federal Social Security Law takes care of social security. If you’d like to get this laws in English, you can purchase it here. In this guide we’ll explain the most important parts.

    In this article we only talk about the legal aspect of employment. If you would like to understand how payroll works from the accounting and tax perspective check out this article.

    Labor conditions were quite a big issue back in the day. It is one of the reason for the last Mexican Civil War. Apparently the labor conditions back then were not exactly fair. Because of this, the law is designed to protect employees by giving them considerable legal rights and benefits. This is a good thing in theory but in practice it leads to some bad practices.

    Mexican workers have the right to form unions freely in order to defend their rights. This is establishes in the Mexican Federal Labor Law. This has led to the formation of large labor union organizations that harness a lot of factual power and legal power. Every company that establishes in Mexico needs to be prepared to negotiate with unions.

    A Mexican laborer, according to the law is anyone who performs a service in a subordinate way to another person or entity. Because of this broad definition if a work relationship is not to be created between a company or person and a worker, such as freelancing or by project hiring, a well drafted service agreement specifying the nature of the relationship must be made.

    Employment Agreement in Mexico

    The beginning of a good work relationship is the employment agreement. The law presupposes that a contractual agreement exists if a working relationship is existent. Because of this, it is really important to have a well-drafted written contractual agreement specifying the nature of the relationship. If, for example, an agreement does not specify a termination, it is assumed to be indefinite. 

    In general, a work agreement in Mexico should include the following.

    • Employee general information (Gender, age, nationality, etc. )
    • Term of the employment
    • Wage and payment dates
    • Vacations amount
    • Working conditions
    • Location of the workplace

    Minimum Wage in Mexico

    Mexico’s Labor Law forbids an employee gets paid less than the national minimum wage. Mexico’s National Minimum Wage Commission is in charge of setting Mexico’s minimum wage. They set a different minimum wage by geographical area. At the beginning of 2019, with the entrance of Andres Manuel Lopez Obrador; Mexico’s new president, the minimum wage in Mexico increased to $102.68 Mexican pesos per day. This is roughly $5.13 US dollars with today’s currency exchange. At the same time, a new economic wage zone was created in the border area (roughly 15 miles from the US border). In this new area the minimum wage is $176.72 Mexican pesos, which is roughly $8.80 US dollars at today’s exchange.  

    Working Hours

    According to the law, Mexican laborers can work a maximum of 48 hours a week if they are working a day shift (6am to 8pm) and 42 hours a week if enrolled in a night shift (8pm to 6am). There can be a hybrid in which a maximum of three and a half night shift hours. This allows for a maximum of 45 hours a week. By law employees have the right to a 30 minute break every day and one fully paid day a week.

    Overtime

    If a Mexican laborer works overtime, every hour of work has to be paid double. If the company requires more than 9 hours of overtime per week, every hour after the ninth one has to be paid triple. Working on Sundays entitles employees to earn an additional 25%.

    Employee Benefits in Mexico

    Holidays in Mexico

    By law there are some mandatory holidays in mexico. The following table specifies them.

    Date Holiday

    Explanation

    January 1st New Year's Day
    February 5 Constitution Day Celebration of the Mexican constitution
    March 21 Benito Juarez' Birthday A national hero and former president of Mexico
    Thursday before Easter Sunday Holy Thursday Commemoration Jesus' last supper
    Friday before Easter Sunday Good Friday Commemoration of the crucifixion and death of Jesus
    May 1st Labor Day
    May 5 Puebla's Battle Commemoration of the Mexican Army's victory over the French
    September 16 Independence Day Celebration of Mexico's independence day
    October 12 Day of the Races Commemoration of the discovery of America
    November 2 Day of the Dead A day to honor relatives who passed away
    November 20 Revolution Day Commemoration of Mexico's Civil War
    December 12 Guadalupe's Virgin Day Celebration of the appearance of the Virgin Mary in Mexico
    December 25 Christmas Day


    Vacations in Mexico

    Besides the mandatory holidays, employees who have worked in the company for one year or more are entitled to a period of paid vacations once a year. The amount of days starts at six working days (meaning you can’t count weekends or holidays)  and it increases by two working days for every subsequent year the employee has worked for the company until a maximum period of 12 working days is reached on the fourth year. After the fourth year is reached, vacation period increases by two days for every five years working for the company.

    It works as follows: 

    • After 1 year of continuous employment, an employee is entitled to a vacation of 6 working days;
    • After 2 years of employment, an employee is entitled to a vacation of 8 working days;
    • After 3 years of employment, an employee is entitled to a vacation of 10 working days;
    • After 4 years of employment, an employee is entitled to a vacation of 12 working days;
    •   When an employee is employed for a period of 5 to 9 years, he/she is entitled to a vacation of 14 working days;
    •   When an employee is employed for a period of 10 to 14 years, he/she is entitled to a vacation of 16 working days.

    Article 76-79 of the Federal Labor Law.

    There is also a mandatory vacation premium of 25% of the salary. This means that employees earn an additional 25% during their vacation period. The idea behind this premium is for the employee to have some extra money to pay for his vacations.

    Christmas Bonus (Aguinaldo)

    By law, you must pay your employees a Christmas bonus equal to or higher than fifteen days of their salary. It must be paid prior to the 20th of December. The idea behind this bonus is for people to have a little extra cash to enjoy the holidays. buy presents and such. For a worker to be entitled to this bonus he must have been working for the company for at least one year.

    Major Medical Insurance

    By law, workers need to be registered in the Social Security Mexican Institute. However, this institute doesn’t exactly provide the best medical attention. Therefore, although it isn’t mandatory, it is common for companies to offer private medical insurance policies to cover major medical expenses such as surgeries.

    Maternity Leave

    When a female employee is expecting a child they are entitled to 12 weeks of Maternity leave. This is divided in 6 weeks previous to the birth of the child and six weeks after. After the child is born and women are going through the nursing period, they are entitled to two, fully paid, special daily rest periods of 30 minutes, for nursing the child. The Mexican Social Security Institute pays for working mothers’ daily salary in full as a social security contribution. Maternity leave may be extended indefinitely if they are unable to work because of the delivery. If the period is extended, she is entitled to 50% of the daily salary of social security contribution for a period of up to 60 days. They are entitled to return to their job as long as no more than a year has gone by since the delivery date.

    In addition to the maternity leave, there are a few restrictions that apply to the labor that pregnant or lactating women can do, and their salary, benefits, and rights should not be affected. They are pretty logical.

    They cannot:

    • Work night shifts or extra hours
    • Work under sanitary contingencies 
    • Perform physically exhausting tasks 
    • Do hazardous or unhealthy labor. This is understood as handling dangerous materials, heavy physical labor or basically anything that may jeopardize her health or her child’s health. 
    Roberto Cornejo

    Roberto Cornejo

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