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  • Jaime Deschamps

¿Incorporating a company in Mexico?

Updated: Apr 17, 2023

For incorporating a company in Mexico, certain requirements must be met, which are as follows:

Define the type of company:

As previously discussed in publications, we consider there are three types of companies worth evaluating:

  • Anonymous Company (SA): A very flexible company, similar to a SAPI, recommended for founders of a company if it will have minority shareholders.

  • Investment Promoting Anonymous Company (SAPI): The most flexible of all companies, recommended if you are going to invest in a company as a minority shareholder, as well as for companies that intend to have investment from funds/sophisticated investors (since this is the structure they prefer most).

  • Limited Liability Company (S de RL): This company is for closed companies (i.e., there will be no entry of investors/partners), with the advantage that it does not require a commissioner, simplifying the appointment of officials and works for companies that are controlled by American companies, as under American law, it allows operating as a transparent entity, meaning that profits and losses are reflected in the American company as if they were its own.

Define partners/shareholders and contributions:

In the case of SA and SAPI, the shareholders must be defined, their proportions in the company, and their investments.

There is currently no minimum requirement to establish the company, so it can be established with $2. We suggest establishing it with $1,000, $2,000, or $50,000 in constitutive capital.

The social capital is equivalent to the contributions made by the shareholders. This means that the constitutive capital indicated must be actually paid by the partners in favor of the company (we recommend making the corresponding deposits once the bank account is available).

It is worth mentioning that contributions to capital (investments) do not generate either Income Tax or Value Added Tax.

Once the constitutive capital is determined, the number of shares that will exist and their nominal value (minimum cost that must be paid for the subscription of a new share, that is, if new shares are created, the person who is the first owner of that share must pay for its purchase from the company, at least its nominal value) must be determined.

It is most common for each share to have a value of $1, however, other values can be used.

It is worth mentioning that the nominal value of the share can be omitted, in which case there will be no minimum cost for the subscription of new shares.

To determine the percentage of participation of each shareholder/partner (in general terms), the number of shares or the value of the social part (in the case of S de RL) must be divided by the total number of shares or the social capital (in the case of S de RL).

It is worth mentioning that the S de RL has a maximum of 50 partners.

Define name, address, object of business, duration

Name = Social Denomination

Prior to the establishment, anyone must request the approval of the company's name through the corresponding Secretary of Economy's portal or through the notary/broker. (We suggest giving three options). Authorization takes three days.

Address = Domicile

Object of Business = Purpose of Company

Duration = Length of Time Company Will Exist Identifying Members of Organs:

Companies generally have three organs: 1) Shareholders/Supreme, 2) Administration, and 3) Surveillance.

The supreme organ is the shareholders' assembly for the case of SA and SAPI, and the partners' assembly

for the case of S de RL.

This organ is composed of all the partners or shareholders of the company, provided they have the right to vote and can decide any matter related to the company.

The administration organ consists of a manager (SA) or administrator (S de RL), or a board of directors (mandatory for SAPIS - minimum 2 members and optional for SA) or managers (S de RL).

The managers/administrators can or cannot be partners/shareholders of the company, it is recommended that the majority be Mexican for the purposes of the company's tax residence (to have its administration in the country) and in theory, it is composed of those who run the company on a day-to-day basis.

They are the epitome of the company and their powers depend on what the bylaws establish (where it can be established that they can act individually or, in some cases, that they must take all or some decisions together and appoint a delegate to carry them out).

We recommend granting them:

  • Power for administrative acts (ordinary acts that do not represent a detriment to the company).

  • Power for litigation and collection (appear in controversies and collect debts).

  • Power to grant powers (allows appointing attorneys without the need of a shareholders/partners assembly).

Evaluate if granting:

  • Power for acts of domain (allows acting as the owner) - We recommend it be joint (must be exercised together).

  • Power for titles and credit operations.

  • Power to open and close bank accounts, as well as to make deposits and draw against them.

The surveillance organ is composed of one or a board of commissioners. The commissioner is mandatory for SA and SAPI, but optional for S de RL.

Selecting the Broker or Notary to Establish Your Company:

The constitution of the company must be carried out through a notary or public broker. The difference between the notary and the broker is that the broker can only act in commercial matters and is regulated at the federal level, while notaries can act in civil and commercial matters and their actions are regulated at the state level.

A disadvantage of establishing before a broker is that they cannot grant powers (appoint representatives beyond the directors/administrators).

We highly recommend notaries 180, 20 and 237 from Mexico City.

The notarial cost of a constitutive is around $15,000.

Defining the Bylaws Clauses:

The bylaws of the company are the rules by which the company will be conducted, in addition to the points indicated in numbers 1-5, issues such as rules for the termination of the company, the rights of each class of shares, and/or preference rights for the purchase of shares are established.

Some of the topics that we suggest including and/or taking into account: there is only a preference for new shares created by the company, not for shares sold by a shareholder. Joint sale right - If you want to sell, you must give me the option to sell the same proportion of my shares, otherwise you cannot sell.

(SA and SAPI) Drag-Along Right - Possibility of making other shareholders sell together under certain conditions.

(SAPI - It is not clear if it applies to SA) Non-competition right - It must be limited to a geographical area, to certain specific activities, and for a maximum of 3 years from the time they cease to be a shareholder.

Increase and decrease in variable part - If no one has more than 50% of the shareholding or it is a closed company, it is recommended to establish that it can be carried out through an Ordinary Assembly, if you are an investor/minority, it is recommended to establish that it must be approved by an Extraordinary Assembly.

Have a list of documentation and send it to the notary:

  • General information of the shareholders will be required

  • Tax ID card (also of spouse if married)

  • Birth certificate (also of spouse if married)

  • Legal residency in the country if a foreign national

  • CURP, if applicable

  • Shareholder identification.

Incorporations in Mexico

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