¿Operating through an entity or through Resico?
If you have a business and are considering incorporating a company in Mexico, you should consider the following:
Incorporating a company offers shareholders advantages such as the ability to clearly organize the relationship between partners, differentiate between project assets and those of each investor/partner, provide certainty to investors, increase customer confidence, and maintain proper control of all business-related activities. It also allows you to take your business more seriously and formalize it.
However, there is currently a simplified trust regime known as the "Simplified Trust Regime" (RESICO), applicable to individuals who earn a maximum of three million five hundred thousand pesos per year and perform any of the following activities:
Business activities = commercial, industrial, or transportation.
Professional activities = those requiring a professional title for their practice.
This regime has the advantage that only income tax is payable, ranging from 1% to 2.5% on the income received (without deductions), meaning for every $100 you earn, you pay between $1 and $2.5, regardless of how much you earn. This is in contrast to companies, which generally pay 30% on their profits (i.e. add up the income, subtract deductions/invoices and pay 30% on the remaining).
Both the company and the individual in RESICO must pay 16% VAT on the goods or services they commercialize/provide.
However, incorporating a company protects its shareholders, as they are only liable for the company's debts up to the amount of their contributions (investments).
This means that any problems, debt, legal actions or risks faced by the company are not applicable to the shareholders personally (generally speaking), however, if a person provides/commercializes goods or services under RESICO, they assume all risks, problems and legal actions personally.
Consider the following:
Company cost: Incorporating a company approximately costs $15,000 plus your advisors' fees.
Accounting: Both RESICO and the company must maintain accounting records, however, the records for an individual/RESICO are cheaper.
Invoices: Both RESICO and the company must issue invoices for the income they receive.
Retention: If you perform your professional activities as an individual through RESICO and contract with companies, they must withhold 1.25% of income tax and 2/3 parts of VAT, which represents a disadvantage, as you will not be able to claim these payments against your expenses (which companies can).
Risks: As discussed, an individual who performs activities as RESICO is personally responsible for their business, meaning that if something goes wrong, they could be sued and their house could be seized, for example. Requirements for RESICO: To be registered with RESICO, you must provide/sell services/goods independently (not as an employee), not participate in any society as a partner/shareholder, not receive income equivalent to salaries, and earn less than $3,500,000 per year.
Company Officials: If you want to open a company, you must appoint officials: Administrators/managers (At least 1 who can be a partner/shareholder, they manage the day-to-day operations of the company) and in the case of SAPI and SA Commissioners (Typically the accountant and they monitor the actions of the administration).