How to Start a Company in Mexico: Legal and Tax Essentials

Mexico stands tall as Latin America’s second-largest economy, which draws entrepreneurs and businesses from around the world. The country offers amazing business opportunities through its prime location, expanding middle class, and strong trade partnerships.

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Starting a business in Mexico needs proper planning and a clear understanding of legal and tax requirements. Business owners must handle everything from picking the right company structure to staying tax compliant. These regulatory demands need attention to run a successful company.

This detailed guide explains what you need to know about setting up a Mexican company. You’ll discover the different business structures, how to register your company, manage your taxes, and meet vital compliance standards. The information helps you build and run a thriving business in Mexico.

Understanding Mexican Business Structures

Mexico’s business landscape gives entrepreneurs several legal structures to start their company. Making informed decisions about business formation requires a good grasp of these options.

Types of Legal Entities in Mexico

The Mexican General Law of Commercial Companies sets up multiple business structures. Foreign investors usually pick from three popular choices. The Stock Corporation (Sociedad Anónima or SA), Limited Liability Company (Sociedad de Responsabilidad Limitada or SRL), and Stock Investment Promotion Company (SAPI) are the most common ways to do business in Mexico ^[1].

SA structures need a minimum capital of 50,000 Mexican pesos ^[2]. SRL structures need 3,000 Mexican pesos ^[2]. Both entities can work with variable capital. They show this by adding “de Capital Variable” or “C.V.” to their names ^[2].

Choosing the Right Business Structure

Business owners should think over these vital factors to pick the right structure:

Capital Requirements: SRLs work best for small and medium enterprises because they need less capital ^[3]
Shareholder Limitations: SRLs can’t have more than 50 partners, while SAs have no limit ^[1]
Management Structure: SAs must have a board of directors. SRLs can run with just one manager ^[1]
Share Transferability: SA shares transfer freely. SRL ownership transfers usually need partner approval ^[2]

Comparison of SA vs SRL Companies

Both structures protect you with limited liability but differ in several ways:

Feature	SA (Stock Corporation)	SRL (Limited Liability)
Minimum Capital	50,000 MXN ^[2]	3,000 MXN ^[2]
Maximum Partners	Unlimited ^[1]	50 partners ^[1]
Ownership Transfer	Freely transferable	Requires partner approval ^[2]
Management	Board of Directors	Single manager or board ^[1]
Share Structure	Negotiable instruments	Non-negotiable interests ^[2]

Larger companies that plan significant growth or might go public often choose the SA structure. It lets them raise capital more easily through share issuance and transfer ^[2]. Small businesses and family operations prefer the SRL structure. It gives them more control over ownership changes and simpler management ^[2].

Both entities pay the same 30% corporate tax rate under Mexican law ^[4]. The SRL structure might benefit international tax planning more. U.S. investors might get pass-through entity treatment in certain places ^[2].

Step-by-Step Registration Process

Mexican company registration needs careful attention to paperwork and compliance with government agencies. The registration process starts after you choose your business structure.

Required Documentation and Forms

Business owners must prepare these important documents to register their company:

Articles of incorporation and bylaws (acta constitutiva)
Proof of company name approval from Ministry of Economy
Personal identification documents for all shareholders
Proof of registered business address
Tax identification registration forms
Power of attorney documentation (if applicable)
Bank reference letters and proof of original capital

Government Agency Requirements

Several government organizations manage the registration process. The Ministry of Economy (Secretaría de Economía) approves business names and maintains the Public Registry of Commerce. Companies need a Federal Taxpayer Registry (RFC) number from the Tax Administration Service (SAT) to operate ^[5]. Companies with foreign investment must register with the National Registry of Foreign Investments (RNIE) ^[6].

The Mexican Social Security Institute (IMSS) handles employee registration and social security compliance. The Public Registry of Property and Commerce (RPPC) records the company’s legal existence officially ^[7].

Timeline and Cost Breakdown

The registration process takes 22-27 weeks ^[2] to complete. Here’s how the timeline breaks down:

Registration Phase	Duration
Planning	1 week ^[2]
Company incorporation	8-12 weeks ^[2]
Public Register Registration	4 weeks ^[2]
Bank account approvals	6 weeks ^[2]
Corporate internet banking	2 weeks ^[2]

Registration costs depend on the type of entity. Simple company incorporation starts at USD 6,350 ^[2]. Detailed registration packages with all services and compliance requirements can cost up to USD 29,798 ^[2]. You might need to pay extra for notary fees, government filing fees, and special permits based on your business activity.

A Mexican notary public must authenticate the incorporation deed and handle government filing ^[5]. Authentication takes 4-12 weeks based on document complexity and local procedures ^[1].

Essential Legal Requirements

Mexican entrepreneurs need to understand their legal obligations before starting a company. The country’s regulatory system sets clear guidelines for business operations and offers flexibility in many areas.

Minimum Capital Requirements

Mexican law offers great flexibility about the original capital investment. Commercial companies outside regulated sectors don’t need minimum capital to incorporate ^[8]. Regulated sectors like financial services and telecommunications must meet specific capital requirements ^[8].

Shareholder and Director Requirements

Each business structure comes with its own rules for shareholders and directors:

Stock Corporation (SA):

Needs at least two shareholders with no upper limit ^[8]
The board must have at least two members ^[8]
Legal representatives can be unlimited in number ^[8]

Limited Liability Company (SRL):

Partners must be between two and 50 ^[8]
The board needs two managers minimum or can work with just one manager ^[8]
Foreigners can serve as directors, though they might need special immigration status if they’re based in Mexico ^[8]

Corporate Governance Rules

Mexican businesses value transparency and accountability in corporate governance. Public companies should have 5-21 directors on their board, and independent directors must make up 25% ^[8]. The core governance rules include:

Requirement	Details
Board Meetings	The president or secretary must call these meetings ^[4]
Meeting Validity	Most members need to attend ^[4]
Resolution Passing	Most directors present must vote in favor ^[4]

Directors must fulfill loyalty and diligence duties. Loyalty means they should think about what’s best for the company, its shareholders, and employees ^[4]. They can’t vote on issues where they might have conflicts of interest ^[9].

Stock corporations must have statutory auditors to watch over operations and protect shareholder interests ^[10]. These auditors cannot be:

Company employees
Shareholders’ employees
Employees of entities the company controls
Directors’ relatives ^[10]

Companies can add rules to their bylaws that protect directors when their actions benefit the company ^[4]. On top of that, they can get Directors and Officers (D&O) insurance to shield against personal liability ^[4].

Tax Registration and Compliance

Tax compliance is the foundation of business operations in Mexico. Companies need to direct their federal, state, and local tax obligations. They must keep proper documentation and meet reporting deadlines.

Federal Tax Registration Process

Every business in Mexico needs to get a Federal Taxpayer Registry (RFC) number from the Tax Administration Service (SAT). The RFC is a unique identifier that you need for all tax-related matters. You can’t issue invoices, file returns, or conduct business transactions without it ^[7].

To get an RFC, businesses must provide:

Certified copy of articles of incorporation
Proof of fiscal address
Legal representative’s identification
Power of attorney documentation (for foreign entities)
Tax identification from country of origin (for foreign companies) ^[7]

The RFC registration process needs in-person completion at SAT offices. Pre-registration can start online. Foreign companies must have a legal representative with Mexican residency to handle the process ^[6].

State and Local Tax Obligations

Mexican companies deal with tax obligations of all types. The corporate income tax rate is 30% ^[11]. Value Added Tax (VAT) stays at 16%, but some border regions can use a reduced rate of 8% ^[11].

Businesses make nine tax payments each year ^[12]. These payments cover:

Tax Type	Rate	Payment Frequency
Corporate Income Tax	30%	Annual with monthly advances
Value Added Tax	16%	Monthly
Payroll Tax	30-60%	Monthly

Tax Reporting Requirements

Mexican tax law sets strict schedules and documentation requirements. Corporate taxpayers must file their annual tax returns by March 31st of the following year ^[13]. Companies also need to:

Submit monthly advance tax payments by the 17th of each month ^[13]
File VAT returns monthly ^[14]
Maintain separate tax accounting books ^[12]
Submit employee profit-sharing payments by May 31st ^[13]
File information returns for foreign-related party transactions ^[13]

Tax audit limitations extend to five years from the filing date. This period can increase to ten years in specific cases ^[13]. Tax contributions take about 55% of profits ^[12]. Proper compliance and planning are vital for business success.

Companies must issue digital invoices (CFDI) for all transactions. They need prior approval from tax authorities ^[11]. This digital system ensures transparency and proper tax collection. It also helps businesses operate smoothly in Mexico’s digital world.

Setting Up Business Operations

Setting up operational infrastructure is a vital phase for companies entering the Mexican market. Businesses need to create their physical and financial foundation after completing legal registration.

Opening Business Bank Accounts

Mexican companies must have local bank accounts to handle tax payments and business transactions. The process takes six weeks to three months ^[6]. A Know Your Customer (KYC) process makes up more than half of the setup time ^[6].

Your bank account application needs these documents:

Government-issued identification for all signatories
Proof of shareholder address
Articles of incorporation
RFC certificate (tax ID)
Power of attorney documentation (if applicable)

Banks require different deposit amounts from 5,000 to 25,000 pesos. Some banks charge annual insurance fees up to 5,000 pesos ^[15].

Getting Operating Licenses

Your business needs specific permits and licenses based on its activities. These are the main operating licenses:

License Type	Issuing Authority	Purpose
Land Use Permit	Municipality	Property usage approval
Operating License	Municipality	Business activity authorization
Health Department Notice	Ministry of Health	Health-related activities
Civil Protection Program	Civil Protection Secretary	Safety compliance

Your Internal Civil Protection Program should detail prevention and emergency response procedures for fires, earthquakes, and hazardous material incidents ^[16].

Setting Up Physical Location

Mexican Federal Tax Code requires all companies to have a physical presence. Virtual addresses won’t work ^[17]. Your fiscal address serves several purposes:

Receives official communications from authorities
Confirms company’s legal existence
Serves as registered location for tax purposes
Functions as primary business address

Tax authorities need proper documentation of your physical location ^[6]. Foreign investors face unique challenges because authorities accept only specific documents as valid proof of domicile ^[6].

Businesses needing industrial or commercial space must get a land use permit before applying for an operating license ^[16]. The Public Registry of Property and Commerce needs your property documentation to legally recognize your business location ^[18].

Regulated industries might need extra permits depending on their sector. Requirements vary by state and municipality, so local legal consultation helps ensure compliance ^[16].

Employment and Labor Compliance

Companies starting operations in Mexico must comply with labor regulations. The country’s strong employment framework will give a complete protection to workers and sets clear obligations for employers.

Hiring Requirements and Contracts

Mexican law requires written employment contracts for all workers. These contracts must include these specific elements:

Employee’s complete information including nationality, age, and tax ID
Description of services and work location
Salary details and payment schedule
Training programs and additional provisions
Designation of beneficiaries ^[1]

Each party should receive a copy of the contract. Companies need proper documentation before employees start work. Mexican law does not protect verbal agreements.

Mandatory Employee Benefits

Mexican employers must provide an extensive benefits package. The core benefits include:

Benefit Type	Requirement
Christmas Bonus	Minimum 15 days salary by December 20 ^[19]
Vacation Days	12 days minimum for first year ^[2]
Vacation Premium	25% additional payment during vacation ^[2]
Profit Sharing	10% of company’s annual profits ^[19]
Social Security	Free medical care and social provisions ^[19]

Mothers receive 12 weeks of maternity leave – six weeks before and six after childbirth ^[2]. Fathers get five days of paid paternity leave ^[2]. The Mexican Institute for Social Security (IMSS) provides complete coverage that includes disability, life insurance, and retirement benefits ^[19].

Payroll Tax Obligations

Employee compensation creates most important tax obligations for employers. Employers contribute 34% to 50% of employees’ gross monthly wages ^[20]. Employees pay about 2.78% ^[20]. These payments cover:

Social security benefits
Housing fund (INFONAVIT)
Retirement savings
Workers’ compensation
Childcare services

Each state has different payroll taxes. Mexico City charges employers a 3% payroll tax ^[21]. Authorities can review company records for up to five years, so detailed documentation is essential ^[22].

Mexican law requires that 90% of a company’s workforce must be Mexican nationals. This rule excludes directors and general managers ^[23]. The requirement helps create local jobs while following Mexico’s labor laws.

Companies must register with the Mexican Social Security Institute (IMSS) within five business days of hiring. Organizations with more than 300 workers need a public accountant’s certification for IMSS compliance ^[22]. This oversight helps implement proper benefits and protections for all employees.

Digital Business Considerations

Mexican businesses face unique challenges and rules as they move into the digital world. The country’s e-commerce revenue will likely hit USD 65 billion by 2029 ^[5]. Success in the Mexican market depends on understanding these digital business requirements.

E-commerce Requirements

Mexican law sets specific rules for online businesses. The Mexican e-Commerce Standard (NMX-COE-001-SCFI-2018) asks companies to:

Show full product costs with taxes and shipping included
Set up customer rating and feedback systems
Keep terms and conditions clear
Add privacy notices in Spanish ^[24]

Companies need a registered importer in Mexico because foreign businesses cannot register directly. They must get proper import papers before shipping to avoid customs delays ^[25].

Digital Payment Systems

Mexico combines old and new payment methods. Digital payment value should reach USD 90.01 billion in 2023 ^[26]. Mexican consumers have clear priorities when paying:

Payment Method	Usage Percentage
Credit Cards	35%
Digital Wallets	27%
Debit Cards	19%
Bank Transfers	8%
Other Methods	11%

Bank of Mexico launched two major digital payment platforms:

Dimo (Dinero Móvil): Started in 2023 for quick bank transfers
CoDi: A government-backed system using QR codes and NFC technology ^[27]

Online Business Regulations

Mexican law requires complete data protection measures. The Federal Law for the Protection of Personal Data in Possession of Private Entities sets strict rules about customer information handling ^[28].

Tax Obligations for Digital Business:

Sign up with Federal Taxpayers Registry (RFC)
Submit VAT returns monthly by the 17th
Issue digital invoices (CFDI) for every sale ^[5]

Foreign companies selling digital services to Mexican customers must register for VAT within 30 days of their first sale ^[5]. Companies that don’t follow these rules face fines between 55% to 70% of owed VAT. Their platforms might also get blocked ^[5].

Several agencies protect consumer rights in digital commerce. Online stores must be transparent about:

Supplier details
Product specifications
Payment security systems
Privacy policies ^[24]

Websites serving Mexican customers must show everything in Spanish. This rule applies only to servers in Mexico ^[28]. Companies need proper security measures, including encrypted data transmission through their networks ^[28].

Foreign Investment Regulations

Mexico’s regulatory framework balances openness to international capital with protection of vital economic sectors. International investors can enjoy the country’s business-friendly environment while following specific guidelines.

Investment Restrictions

Mexico’s Foreign Investment Law (FIL) defines three categories of investment restrictions:

Activities Reserved for the State:

Oil and hydrocarbon exploration
Control of the national electric system
Nuclear power generation
Radioactive minerals
Telegraph and postal services
Control and surveillance of ports and airports ^[29]

Activities Reserved for Mexican Nationals:

Domestic land transportation
Development banking institutions
Professional and technical services ^[30]

Sector	Foreign Investment Cap
Manufacture of explosives	49%
Printing of newspapers	49%
Fresh water fishing	49%
Port administration	49%
Broadcasting	49%
Air transportation	25%
Cooperative production	10% ^[31]

Capital Repatriation Rules

Mexico’s capital repatriation framework sets clear rules about moving funds across borders. The Tax Service Administration (SAT) manages these regulations with specific provisions:

Repatriation Requirements:

Payment of 8% tax on repatriated amounts within 15 days of transfer ^[10]
Mandatory investment in Mexico for minimum two years
Funds must be invested through approved financial instruments ^[32]

Both entities and individuals can regularize previously unreported offshore investments through the capital repatriation initiative. Qualifying investments must be:

Held abroad until the specified cutoff date
Brought back through authorized channels
Invested in approved Mexican financial instruments or fixed assets ^[10]

Foreign Exchange Controls

Mexico uses a freely floating exchange rate system with minimal market intervention. The Mexican peso stands among the most traded emerging market currencies ^[33]. The foreign exchange system works through:

Currency Management:

No capital controls exist
Market forces determine exchange rates
Daily peso turnover reaches USD 114 billion in spot and derivatives markets ^[34]

The Bank of Mexico (Banxico) oversees the system by:

Monitoring banks’ FX funding needs daily
Setting regulatory limits on bank net open positions
Responding quickly to market stress situations ^[33]

International investors receive benefits like:

Unrestricted currency conversion
Freedom to move capital and profits
Access to hedging instruments

The National Foreign Investment Commission looks at investments above set thresholds, especially in restricted sectors. Investments exceeding roughly 1 billion pesos need a Commission resolution within 45 business days ^[4].

Documentation Requirements:

Questionnaire detailing investment origin
Written application with project specifics
Proof of payment for applicable fees
Notarized power of attorney
Corporate documentation from home country ^[31]

National security concerns might lead to application rejection ^[35]. Yet 95% of foreign investment transactions need no government approval ^[36]. This shows Mexico’s welcoming attitude toward foreign capital.

Regulated sectors that need approval require:

Detailed investment plans
Economic and social benefit analysis
Compliance with sector-specific regulations
Review of foreign investor credentials ^[31]

The Mexican peso’s global status shines through with 80% of trading happening outside Mexico ^[34]. This international presence, paired with strategic investment safeguards, creates a balanced system that protects national interests while welcoming foreign investment.

Conclusion

Mexico welcomes entrepreneurs and investors with its business-friendly environment, despite having several regulatory requirements. The country offers clear guidelines about company formation, tax compliance, employment regulations, and digital business operations.

Companies thrive in the Mexican market when they choose the right business structures. They must comply with tax obligations and labor regulations strictly. Businesses need to adapt to the changing digital world while following foreign investment restrictions in certain sectors.

Mexican officials have optimized many processes. However, proper documentation and local expertise remain crucial. Latin America’s second-largest economy offers growth opportunities to businesses that understand and follow regulatory requirements.

Mexico’s strategic location, expanding consumer market, and 50-year old legal frameworks create the most important opportunities for new companies. Businesses that plan properly and comply with regulations from day one avoid complications. These foundations help build lasting success in the Mexican market.