Types of companies that can be set up in Mexico

Mexico has emerged as an attractive investment destination, attracting the attention of global businesses. Mexico’s strategic geographical location, located between North America and Latin America, facilitates access to a large market and serves as an important bridge for import and export activities. The USMCA (US, Mexico, Canada Agreement) helps reduce trade barriers and promote trade between member countries. The Mexican government also has many attractive investment incentives, especially in the manufacturing, technology and service sectors, in order to attract foreign investment. Mexico’s infrastructure is being heavily invested and developed, facilitating business operations. Investors have many types of companies to choose from when established, Viet An Law would like to provide some information to customers as follows.

Types of companies that can be set up in Mexico

Limited Liability Company

A Limited Liability Company, or “Sociedad de Responsabilidad Limitada” (S. de R.L.), is one of the most popular types of offshore companies.

Main features:

• Limited Liability: Like LLCs in the United States, members of the S. de R.L. are only responsible for the company’s debts and obligations to the extent of their capital contribution.
• Number of Members: The minimum requirement is two members.
• Minimum Capital: The minimum capital to establish an S. de R.L. is 3,000 Mexican pesos and a maximum of 50,000 Mexican pesos.
• Shares: The company’s shares cannot be freely transferred or publicly traded.
• Management: A flexible form of management, which can be managed by designated members or managers.
• Legal Examination: There is no mandatory requirement to appoint a legal examiner.

What is a Legal Examiner?

Role of a legal examiner:

• In some types of companies, especially large joint-stock companies, the appointment of a legal examiner is mandatory.
• Legal examiners are responsible for examining and supervising the company’s financial, accounting, and legal compliance. They ensure that financial statements are prepared accurately and transparently, and detect and prevent misconduct.

Joint Stock Company

The Joint Stock Company in Mexico is also very popular, known as “Sociedad Anónima” (S.A.). This is one of the most popular forms of business, especially for large companies and businesses that want to raise capital from the public.

Main features:

• Limited Liability: Shareholders are only responsible for the company’s debts and obligations within the scope of their capital contribution.
• Minimum Capital: The minimum capital to form an S.A. is 50,000 Mexican pesos or approximately US$2,700.
• Number of shareholders: There is no limit to the number of shareholders.
• Shares: Shares are freely transferable, facilitating transactions and capital mobilization.
• Management: The S.A. is governed by a board of directors, which may include shareholders or non-shareholders.
• Audits:A. often requires independent audits to ensure transparency and compliance with the law.
• Mandatory Conditions for Legal Examiners: In the S.A. in Mexico, the legal examiner is often referred to as a “Comisario”.
  • Comisario is responsible for monitoring the activities of the board of directors and ensuring that the company complies with legal regulations and the company’s charter. They are also tasked with auditing financial statements and ensuring accuracy and transparency.
  • Comisario oversees the decisions and actions of the board, ensuring that they are in line with the interests of the company and its shareholders. They have the right to request information and documents from the board of directors in order to carry out their duties.
  • Comisario checks the company’s financial statements to ensure that they are prepared in accordance with accounting standards and honestly reflect the company’s financial position.
  • Comisario reports the results of its inspection and supervision to shareholders at the general meeting of shareholders. They can make recommendations and suggestions to improve the company’s operations.

Limited Partnership

In Mexico, the Limited Partnership form is called “Sociedad en Comandita Simple” (SCS). This is a type of business that combines the characteristics of a partnership and limited liability, bringing flexibility to investors.

Main features:

• Two types of membership:
  • Partnerships (Comanditados): These are the managers and operators of the company, which are indefinitely responsible for the company’s debts.
  • Limited capital contributors (Comanditarios): Those who only contribute capital and do not participate in management, are responsible for limited liability within the scope of their capital contribution.
• Liability:
  • The general partner is personally liable for the debts of the company.
  • Limited capital contributors shall only be responsible within the scope of their capital contributions.
• Administer:
  • The company is managed by general partners.
  • Limited capital contributors do not have the right to participate in management.

Other company types that can be set up in Mexico

Mexico Branch

A Mexican branch is a form of commercial presence of a foreign company in Mexico. It is an option for companies that want to expand their business into the Mexican market without the need to establish an independent legal entity.

Main Features of Mexico Branch:

• Maintain Legal Status: The Mexico Branch is not a separate legal entity. The overseas parent company retains its legal status and is responsible for all operations of the branch in Mexico.
• Liability: The parent company is solely responsible for the debts and obligations of the branch in Mexico.
• Procedure for establishment:
  • The establishment of the Mexican branch should be carried out at the National Commission for Foreign Investment (Comisión Nacional de Inversiones Extranjeras) and the Ministry of Foreign Affairs (Secretaría de Relaciones Exteriores).
  • The branch also needs to be registered at the Register of Public Trade (Registro Público de Comercio).
• Business Activities: The Affiliate can conduct the same business activities as the parent company, as long as it complies with Mexican law.
• Taxes: The Mexican branch must pay corporate income tax and other taxes in accordance with Mexican law.