Legal Entities for Incorporating in Mexico

When setting up operations in Mexico or abroad, companies must ensure they have the proper legal and corporate structure to provide certainty and minimize risk. Although working under the legal entity of a Shelter services company in Mexico is the best way to achieve this, some businesses may opt to establish their own legal entity. Though there are several reasons this may be desirable or necessary, the main one is that if a company needs to issue facturas, or official Mexican tax receipts it will need to incorporate in Mexico. In this article we discuss the three most common legal figures available to do this.

The first entity is Sociedad de Responsibilidad Limitada (S de RL). This entity is most similar to a Limited Liability Company under United States law. The company is made up of a maximum of 50 members whose liability is limited by the amount of membership interest they hold. It is managed by a Gerente (Manager) who may be a member of the company or not, and the member’s (or shareholder’s) meeting is in charge of making decisions regarding the company’s management. This structure is the best option for incorporating joint ventures and family businesses as it provides credibility and limits the liability of members while also allowing for flexibility. There are no shares in this type of entity. Instead contributions made to the company are represented by a membership interest (non-negotiable instrument).

The next entity is called a Sociedad Anónima (SA). This is what most businesses in Mexico use to incorporate, and its structure is similar to a Corporation under United States law. This entity is owned by two or more shareholders (with no limit on the number of shareholders). Shareholders’ liability is limited to the amount of their ownership share in or capital contribution to the company. It is managed by an Administrador Único (Sole Director and CEO) or a Board of Directors, with the shareholders’ meeting being its main decision-making authority. It also requires that a Comisario (Statutory Auditor) be appointed by shareholders to oversee the company’s Board of Directors or Sole Director and CEO.

The third most commonly used entity is a Sociedad Anónima Promotora de Inversión (SAPI), which most closely resembles a Private Equity Firm under United States law. The entity is similar to an SA, but is governed by more flexible rules. It was introduced in 2006 under the Ley de Mercado de Valores (General Securities Law) and allows its bylaws to include rules such as imposing restrictions of any nature on the transfer of shares within the same class, providing shareholders with the right to withdraw or be expelled (with justified cause) from the company, and the issuance of non-voting, restricted voting, and other types of shares. It is managed by a Board of Directors and has independent oversight as outlined in the company’s bylaws.

There are several options for setting up your corporation in Mexico, all of which have pros and cons depending on your circumstances and goals. This makes having the expertise of professionals specializing in Mexican corporate and tax law key in ensuring you choose the option that will provide the most benefits and savings in the long term. Reach out today if you want to learn more about these entities and which option will be the best for your company.