5 Steps for Incorporation of a Company in Mexico – SK Patodia

5 Steps for Incorporation of a Company in Mexico

The process of company incorporation in Mexico consists of many steps along with strict rules. It can take a long time if you do not understand the local regulations and policies.

1. Choosing the type of entity

The first step towards incorporating a business in Mexico is deciding whether your business will be a Mexican entity, a branch, or a representative office. Understanding the kind of corporate governance and what type of activities your business will be doing, can really help you with the decision of selecting which type of corporate entity you would actually need, or that a branch or a representation office will be a better option instead. Also, it is important to decide if the company principals such as Shareholders and Directors will be physically present in Mexico for the incorporation process or they will assign the process to an expert in Mexico who will further assist and make the complete process much easier.

2. Choosing a name

If the incorporation of an entity is your final decision (a branch and a representative office are just an extension of the foreign company in Mexico), then it is important for you to decide the name of your business and come up with at least three company name choices in order to put request to the Ministry of Economy ultimately. This process can itself take anywhere from three days to a week for the authorities to tell if the name is already taken or if it is approved.

3. Sending in documents and bylaws

If the Mexican entity will have foreign shareholders then there are quite many documents that are required to be formalized first for the incorporation process. Some of the documents needs to be notarized and apostilled or legalized, (depending if the country origin has entered into The Hague Convention) to be effective in Mexico.

Please note that if someone will be assisting you in Mexico with the incorporation procedure and will act on behalf of the foreign shareholders, a specific Power of Attorney (PoA) is prepared and further sent to be signed by the shareholder or its representative(s), which will then have to be notarized and apostilled in order to be completely effective in Mexico.

While all the information is being formalized, the bylaws can actually begin to be drafted. In Mexico, all Corporate entities must have bylaws. The Articles of Incorporation will then be added according to the bylaws (and included in the same public deed) specifications. It is mandatory that the bylaws of any company be necessarily notarized. After the documents are signed and submitted, this marks the completion of the legal process of incorporation. In fact, the timeline to finish this step can vary depending on when the signed, notarized, and apostilled original documents are received. Therefore, once the notary receives everything, the signing of the incorporation should then take place in less than 10 business days.

4. Getting a Tax ID

A newly incorporated company in Mexico needs a Tax ID number to conduct its business. Foreign shareholders must note that a Tax ID can only be requested by a Mexican resident or a citizen. By knowing this in advance, the correct person can be granted the PoAs to obtain the Tax ID. However, if this has not been thought out before clearly, then the shareholders will have to hold a meeting to pass a unanimous resolution granting PoAs to a Mexican resident or citizen to get the Tax ID. Without the Tax ID number, all further mandatory registrations like registering before the Foreign Investments Registry, applying to open a corporate bank account, or issuing invoices, will not be possible.

The individual who is acting on behalf of the company will go in person to the Tax Authority with the Articles of Incorporation to request the Tax ID further. This step can also be fulfilled by the notary; however, the representative has to go to the notary´s office in order to sign the request of the Tax ID, which is faster and easier. Finally, it is very crucial to take into consideration that in order to obtain the Tax ID, the business must have a physical office in Mexico which needs to be evidenced by an authorized proof of domicile. This is one of the hardest parts of incorporation since there are very few documents that the Tax Authority and other Governmental Authorities usually accept.

5. Getting a bank account

Newly incorporated companies need to have a Mexican bank account since the taxes can be only paid by the Mexican banks. This is due to the foreign banks not having the platform used by the Tax Authority to receive the tax payments. Please note that the opening of the corporate bank account takes 1.5 to 3 months’ time period and that it can take place only after the company has successfully received its Tax ID and it can take 1.5 to 3 months.