Company incorporation in Mexico

If you do business in Mexico there may be a point that it makes sense to set up a local company. Then you need to know how to comply with local regulations and who can help you.

This article describes:

  • the most likely types of company to set up;
  • how you do this and who can help you;
  • a few important fiscal regulations.
Office building where a foreign company is incorporated

Your legal entity in Mexico

Mexico offers a wealth of opportunities for foreign businesses due to its strategic location, large market, and strong trade relationships, especially with the United States and other Latin American countries. The government has implemented various reforms to attract foreign investment, particularly in sectors such as manufacturing, technology, retail, and services.

Most Common Business Forms for Foreign Companies

The most common business structures for foreign companies in Mexico are the Sociedad Anónima (S.A.) and Sociedad de Responsabilidad Limitada (S. de R.L.).

  • Sociedad Anónima (S.A.): The Sociedad Anónima (S.A.) is similar to a corporation and is the most common business structure for larger foreign companies. It allows for the issuance of shares and is suitable for businesses that may later seek to raise capital or expand. The liability of shareholders is limited to the capital they contribute.
  • Sociedad de Responsabilidad Limitada (S. de R.L.): The S. de R.L. is more suitable for small to medium-sized businesses. It has fewer formalities and is often used by foreign investors seeking to maintain control while limiting their personal liability. It is similar to a limited liability company (LLC).
  • Foreign ownership is allowed up to 100% in most sectors. However, certain activities such as banking and transportation require a local Mexican partner.

These structures offer flexibility for foreign investors depending on the scale and nature of the business, with the S.A. being more suitable for companies planning to issue shares or seek outside investors.

Setting Up a Company in Mexico

Setting up a company in Mexico requires several steps, and the process can vary depending on the chosen business structure and location. Here are the general steps involved in incorporating a business in Mexico:

  1. Choose a company name and ensure it is not already in use by another company. The name must be approved by the Mexican Ministry of Economy.
  2. Draft and notarize the company’s Articles of Incorporation (Escritura Pública) in front of a notary public. The document must include the company’s objectives, capital, and governance structure.
  3. Register the company with the Mexican Tax Administration Service (SAT) to obtain a Federal Taxpayer Registry (RFC). This is necessary for tax purposes.
  4. Open a corporate bank account in Mexico and deposit the required capital. The minimum capital requirement varies, but for an S.A., the minimum is typically MXN 50,000 (approximately USD 2,500), while an S. de R.L. has a lower requirement.
  5. Register the company with the Public Registry of Commerce (Registro Público de Comercio) to obtain legal recognition and the right to operate.
  6. Depending on the business activity, register for local permits and licenses, such as a municipal operating license and zoning permits.

The process of incorporating a business in Mexico can take between a few weeks to a few months, depending on the complexity of the business and the location. Foreign businesses are encouraged to consult with legal and accounting experts familiar with local regulations to ensure compliance with Mexican laws.

Taxation and Withholding Taxes

Mexico offers a relatively straightforward tax regime for companies, but there are key points that foreign businesses should be aware of:

  • Corporate income tax in Mexico is set at a rate of 30% on net profits. Companies are required to file annual tax returns and comply with regular tax reporting obligations.
  • Mexico also has a 16% Value Added Tax (VAT), which applies to most goods and services. Businesses must register for VAT if they are engaged in taxable activities.
  • Regarding dividends, there is a 10% withholding tax on dividends paid to foreign shareholders, which may be reduced under Mexico’s double taxation treaties (DTA) with various countries.
  • Mexico has a wide network of DTAs that help reduce withholding taxes and avoid double taxation on income generated by foreign businesses.

Service Providers for Company Incorporation

These service providers can assist with all aspects of company incorporation in Mexico, including legal advice, tax registration, and ongoing compliance, ensuring that foreign businesses are set up correctly and operate within the legal framework.

Do you need a local company?

A local entity is not always the answer. A distributor, an agent or an employer of record gives you presence in the market without the administration of your own company.

You do need one when you hire local staff, hold stock or an office, bid for public tenders, or when your activity creates a permanent establishment for tax purposes. The alternative is usually a branch: cheaper to set up, but the parent company stays liable.

Do you need help in Mexico?

Our service providers are local specialists. They know the market, the regulations and the parties that matter, and they can support you with the steps on this page.

Ask a professional

Setting up a company in Mexico in three steps

Step 1

Choose the legal form

Compare a limited company, a branch and a representative office on liability, minimum capital, local director requirements and what a bank will accept.

Step 2

Incorporate and register

Prepare the statutes and identification documents, register with the trade register and the tax authority, and open a local bank account — usually the slowest step.

Step 3

Stay compliant

Arrange bookkeeping, VAT and payroll from day one and note the filing deadlines. Fines for late annual accounts are common and easy to avoid.

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