Looking to start a business in Mexico as a foreigner? here is a complete guide plus legal requirements for starting a profitable money-free business in Mexico.
Okay, providing an in-depth analysis of the 50 best small businesses. opportunities in Mexico and a range of industry-specific business plan templates; We will now analyze in detail the legal requirements, market feasibility and everything else you need to start a business in Mexico. So put on your entrepreneurial hat and let’s get on with it.
Why start a business in Mexico?
Starting a business in Mexico is very similar to starting a business in the United States of America. It is mostly a matter of careful planning and filing. Although the process of starting a business in Mexico is very similar to starting a business in the United States, the decision to start a business in Mexico has many benefits.
Some of these benefits include cheaper labor with a proven track record for manufacturing quality, and proximity to the United States, which makes shipping costs less expensive.
In fact, Mexico is the easiest country in Latin America to start a business as its faster and much less difficult to do so. In some cases, it only takes one day and zero dollars to start running your own company. However, there are some steps you must follow to comply with the Mexican rules and regulations set out to help you get started.
Here are the steps you can take to start a business in Mexico.
Starting a Profitable Business in Mexico as a Foreigner Complete Guide
1. Have the right business idea: To start a Business anywhere, the very first step is to have a reliable and workable business idea. Your best bet is to look at niches, products or services in which you already have some experience. Building a business in an area where you have no previous knowledge or experience will be much more difficult.
You need to know if your great idea can really be a business. How do you know? Unfortunately, you don’t always know; some entrepreneurs have poured their life savings into a concept that can’t really be a business.
To determine if your business idea is viable, you need to take a step back and look at the concept objectively. You should ask yourself the following questions:
- Is there a market for this product and is there enough demand for it?
- Will your potential target market pay for your service or product? You have to remember that sometimes people will not accept a product, even if it is cheaper, because they like to stick to what they know and are familiar with.
- Is your potential target audience already paying for something like your offer? Do you sincerely believe they will migrate to your product or service?
- How would you define your proposal? Will you provide everything for everyone, or do you decide to choose a niche product or service that you offer to a select target market?
The goal of asking all of these questions is to do something like a reality check; you don’t want to invest time and money in an unsustainable business. Your business needs a decent potential target market, because if you don’t have clients, your business will not generate any profit.
Conduct a preliminary study of your potential target market and determine if they will be a possible customer base for your business.
2. Determine the type of business structure to go for: There are several options for setting up your business in Mexico. With very few exceptions, all of these corporate structures can be used by both foreigners and Mexican nationals. Some of these include:
- Individual entrepreneur / owner
- Joint Stock Limited Liability Corporation (SA or SA de CV)
- Limited Liability Corporation (S. De RL)
- Partnership (general SNC or limited SCS)
- Branch of an already established enterprise
If you are going to be self-employed, you will need to take full responsibility of your business personally. You must register your activity for tax purposes as “persona física con actividad empresarial”.
The SA structure is similar to that of a fixed capital joint stock company. If you want this structure, but with variable capital, then SA de CV offers this option. It is a common choice for entrepreneurs coming to Mexico to start a business. There is a minimum capital requirement, but this does not have to be paid initially, and the liability of shareholders is limited to the amount they invest.
Limited liability corporations are also popular with foreign investors, and again limit the tax and debt liability faced by their founders. This type of business must be founded by at least two people and is taxed at corporate tax rates.
Partner structures in Mexico are similar to other countries in the world. You can choose between a “general partnership,” in which the partners take full responsibility, or a “limited liability partnership,” in which tax and debt obligations are limited. In any case, it is important to properly draft the partnership agreement in order to maximize the benefits of this structure.
Choosing the structure of your company is an important step and it is recommended that you seek legal advice to ensure that you have made the right choice for your business.
3. Write a business plan: Once you’ve developed an idea for your business, you should draw up a roadmap in the form of a business plan. Among other things, it should state your business goals, how you achieve them, financial needs, and marketing plans. It may also contain background information about an organization or team trying to achieve these goals.
A business plan doesn’t have to be very long, it just needs to contain the basics of your plan and you can expand on it. how a business grows – The focus of your business plan can also change over time depending on how you use it. For example, if you intend to use it to raise funds, you will have to focus very carefully on the management, financial aspects and growth potential of your company.
4. Register your company name: This can be done online and it shouldn’t take more than a couple of days. The website for registration is in Spanish, so getting local assistance or working through your notary can speed up the process.
Your notary will then draw up a deed of registration, which will be in Spanish. This document contains all important information about your company, such as the names and addresses of shareholders, the business you intend to do, and the name of the company.
Typically, your business description is intentionally loose. to allow your business to grow and develop over time without requiring registry changes. All founders of the company will be required to sign a deed of incorporation in front of a notary. Each of them will provide:
- proof of identity and the right to stay in the country (e.g. passport and valid visa)
- proof of address (usually a recent utility bill)
The notary will then register the company with the local government and keep a copy of the memorandum of association for reference.
Finally, you need to register with the National Register of Business Information, which is controlled by the Department of Commerce. If you are a foreign business owner without a Mexican residence, you may also need to register with the Department of Commerce’s Foreign Investment Register. Your notary will be able to advise you if this step is necessary.
5. Drawing up the constituent act: When you have received approval from the SRE and you know for sure the applicable business structure, you need to create a Articles of Association. This document gives life and defines all the general and basic aspects of the company: company name, purpose, type of company, administration, duration, etc.
6. Registration with the Tax Administration Service (SAT): When the Founding Act is created and legalized, the next step will be the Tax Administration, the Mexican equivalent of the IRS. From this register, the taxpayer identification number is obtained, which contains the federal taxpayer identification number (RFC).
7. Registration in the Public Register of Property and Trade (RPPC): Next, you will need to go to the Public Registry of Property and Commerce in the state and city where the company will be registered to indicate your business goals, objectives and commercial purposes. This process requires the submission of the Articles of Incorporation, RFC and a power of attorney that allows the legal representative to act For the company.
After that, you will need to sign your business with the Mexican Social Security Institute, even if it is a company where only the employer is the only employer, as he will need to make his own personal contribution to his social security accounts. In addition, if you do not do this in time, IMSS may be liable for a fine.
8. Registration with other required government agencies … Depending on the type of business in which you specialize, you may need to register with various government agencies, the most common of which are: Ministry of Health, Secretariat for Ecology and Environment, Mexican Industrial Property Institute, etc. At this stage you must also complete any municipal or state permits required for the geographic area in which you want to obtain a permit.
9. Legal obligations and responsibilities: As a business owner, you or another designated director must register with the tax authorities (SAT). This can be done at your local office, where you must present a photo ID and visa, a certified copy of your registration certificate, and proof of your company’s address (such as a utility bill).
Certain types of businesses in Mexico must obtain a legal trade permit. If you serve the public directly (for example, in a shop or restaurant), then you may also need to register your business with your local government.
If you intend to hire people in your business, then you will need to register with the Mexican Institute of Social Security (IMSS) and the National Fund for Workers’ Housing (INFONAVIT). This can be done at the IMSS branch closest to where your business is registered.
Once registered, you can use IMSS online systems to run most of your online business. However, the website is only provided in Spanish, so you may need to find a friend or translator to help you.