Castañeda & Asociados | Business in Mexico

Business in Mexico

The Incorporation Process

THE INCORPORATING PROCESS

1. Two Shareholders Needed. Unlike the law of many other countries, Mexican Law requires a minimum of two shareholders to incorporate.

The general basic procedure related to the organization of a Mexican corporation with 100% foreign capital participation is as follows:

2. File for an Incorporation Permit. A permit from the Ministry of Foreign Affairs must be obtained, in which, at the time of filing the proposed names the company (several alternatives in order of preference) must be included. Turn around time is about two or three days.

3. Registering the Corporation in the Public Records. The corporate charter and bylaws must be signed by the corporate members or proxies before a Notary Public or Commercial Broker whom will authorize it for registration in the Commercial Public Records and the various government agencies. No other procedure for registration is presently available.

Forms of Association

OTHER FORMS OF ASSOCIATION

Although not considered corporations, hence not legal entities, these are common forms of doing business in Mexico without the associated with the former during formation and operation.

Association in Participation. The Association in Participation (Asociación en Participación or "AP") is another common form of doing business in Mexico. Generally, an AP is an agreement in which one or more partners (asociados) participate in kind or services to a managing partner (asociante) in exchange for a right to participate in the profits of a commercial operation which is controlled by such managing partner.

For commercial purposes, the Association in Participation is not a separate legal entity. However, for tax purposes it is a separate entity and requires registration.

Joint Venture Agreement. Generally, a joint venture agreement is an association of persons (individuals or legal entities) for a limited period of time in which such persons jointly undertake a specific business enterprise. Although a joint venture agreement is sometimes mistakenly categorized only as an AP, a joint venture agreement can take many other forms. A joint venture agreement can take any form in which the parties agree to develop their business and agree to provide for their respective services and contributions of capital or resources, to the by-laws of a new independent company, or both. The exact type of business venture that is to be undertaken determines the liability and tax treatment of such agreement.

Incorporating in Mexico

BASIC PROCEDURE TO INCORPORATE IN MEXICO

The Mexican Law of Corporations (Ley General de Sociedades Mercantiles) recognizes six types of corporations, with differences ranging from the number of members allowed as members, to the way they are treated legally and for tax purposes.

These are:

I.- General Partnership. (Sociedad en nombre colectivo)

II.- Limited Partnership. (Sociedad en comandita simple)

III.- Limited Liability Company. (Sociedad de responsabilidad limitada)

IV.- Corporation. (Sociedad anónima)

V.- Sociedad en comandita por acciones, y

VI.- Sociedad cooperativa.

Activity Regulations

ACTIVITIES WITH SPECIFIC REGULATIONS IN WHICH FOREIGN PARTICIPATION IS ALLOWED IN THE PERCENTAGES INDICATED.

1. Up to 10% foreign participation in:

Production Coops.

2. Up to 25% in:

a) National air transportation.

b) Aero taxi transportation; and

c) Specialized air transportation.

3. Up to 49% in:

a) Insurance institutions.

b) Bonding Institutions.

c) Money exchange.

h) General deposit warehousing.

i) Leasing.

j) Factoring financing.

k) Financing Societies with limited purpose.

l) Societies referred to in article 12 bis of the Stock Exchange Law (Ley del Mercado de Valores)

m) Retirement funds Administration.

p) Manufacturing and trade in explosives, fire arms, shells, ammunition and fire works, not including utilization of explosives for industrial and extractive purposes.

q) Printing and publishing for exclusive national distribution.