Open a LLC in Mexico
Updated on Wednesday 21st July 2021
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The limited liability company in Mexico is one of the most used business forms, both by foreign investors and local entrepreneurs. It can also be referred to as the LLC or the S.R.L., after its Spanish name. In order to open a limited liability company in Mexico, investors will need to go through a multi-step incorporation procedure, from obtaining the needed authorizations to registering with the relevant Mexican authorities. Investors who need help opening a business in the country can request the services provided by our Mexico company registration agents.
The characteristics of the Mexican LLC
The limited liability company, or Sociedad de Responsabilidad Limitada, S.R.L., is a type of company in Mexico that offers a convenient degree of investor’s protection (liability limited to the amount invested) and that has a low incorporation capital. It is founded by two or more shareholders and it can have up to 50 shareholders.
The LLC is suited for small and medium-sized businesses and it offers a flexible organizational structure for investors. This type of company cannot offer its shares for public trading. The transferability of the shares and the management structure are agreed upon in the company’s bylaws. Investors who are interested in setting up a company in Mexico can open an S.R.L. for all types of small and medium-sized businesses, for import and export businesses and even as a holding company.
Foreign businessmen considering to set up a company in Mexico as a limited liability company should know that the local authorities provide friendly policies for foreign businessmen. For instance, this company type can be registered with 100% foreign ownership. Although numerous countries provide this right as well, there are jurisdictions where various restrictions regarding full ownership can apply.
The company type needs at least two shareholders for the incorporation and it is necessary to know that there aren’t are restrictions or requirements regarding the shareholding structure – thus, the owners can own equal shares of the company, or they can establish any other structure, where an investor holds almost all of the shares of the company and the other, only a small fraction.
Limited liability company formation in Mexico
The Mexico company formation process is one that includes several steps and investors need to observe all of these, plus the conditions for company taxation and filing, once the company is operational. In order to open a company in Mexico, investors need to go through these following stages:
- obtain the name authorization from the Ministry of Economy;
- prepare the company deed with a notary public in Mexico;
- register the deed with the Public Register of Commerce;
- receive the tax ID number and register with the local tax administration;
- register for social security purposes and notify the government of having opened a mercantile establishment;
- register the company with the National Business Information Registry.
Setting up a corporate bank account for the Mexican LLC
Given that the Mexican LLC is a corporate entity, it will need a corporate bank account that is open at a local commercial bank, with the purpose of depositing the minimum share capital. This is done during the process of company formation in Mexico, but the same account will be later used for the company’s financial transactions.
All corporate bodies in Mexico must have a bank account set up in their own name and investors will have to provide specific documents, in accordance with the rules of the bank where the account is set up. Typically, banks will need the company’s incorporation documents and papers attesting that the company has a registered office in Mexico.
What are the rights of a Mexican LLC?
First of all, the Mexican LLC represents a separate legal entity that has its own legal personality. From a legal point of view, there is a clear distinction between the company and the owners. This means that the company has its own rights and obligations, separate from the ones of the investors. This is why it is entitled to own properties in Mexico and to sue others (natural persons or other companies) based on the legal grounds recognized by the Mexican law.
A Mexican LLC also has the right of holding equity in other companies and it can enter trading activities as well. If you need information on what other rights this company can have, you can address to our team of specialists in company incorporation in Mexico for in-depth advice.
Please mind that the company has multiple obligations as well. Some of them are: paying the taxes in accordance with the applicable law, register its employees for social security and employment taxes, keep accounting documents as specified by the accounting procedures applicable in this country and submit tax reports.
When the company will hire its first employee, the said employee will be registered with the Mexican Social Security Institute. This is also a mandatory step for company formation in Mexico and the procedure can be completed in one working day. Although during the registration of the company investors may need to pay specific fees when submitting papers with various institutions, in this particular situation, the procedure is free of charge.
If you need a detailed presentation on the fees and the taxes that you will have to pay in the initial phase of setting up a company in Mexico, our team of consultants remains at your disposal with in-depth advice and assistance. You can also receive consultancy services on the taxes you will have to pay after the business becomes operational.
How many small and medium-sized companies are in Mexico?
Taking into consideration that the Mexican LLC is generally suitable for incorporation for those who want to open small and medium-sized companies (SMEs), we will present below information regarding the structure of local companies. The size of a company is established depending on the number of employees the company has, and on this matter, you should know that the following apply:
- in 2020, there were less than 10,000 large companies operating in Mexico (these are those that employ more than 250 employees);
- medium-sized companies, hiring between 51 and 250 employees, accounted for 29,000 in 2021;
- the number of small companies was much larger in 2020 compared to medium-sized companies, accounting for 144,000 companies (these are those that employ 11 to 50 employees);
- the large majority of companies in Mexico operate as micro companies, hiring less than 10 employees – in 2021, they accounted for 4,7 million companies;
- according to the data gathered by the Library of the Organization for Economic Cooperation and Development (OECD), in 2014 there were more than 2,5 million micro-companies registered in the services sector.
Special registration taxes or fees apply for some of these steps. One of our Mexico company registration agents can give you detailed information and help you during any one of these stages. Contact us for more information and advice on how to open a company in Mexico.