Starting a business in Mexico is an exciting idea in today’s slower growth U.S. economy. Mexico’s economy currently ranks number 11 in the world. The fact that Mexico’s economy is currently ranked in the company of Italy and the United Kingdom is surprising to many North Americans. Since many economists believe that Mexico could be the next major economy, businesses have many questions about how to start a business in Mexico the right way.
All facts tell us that it’s a good time to learn about starting a business in Mexico. In the past, Mexico was perceived as a violent and corrupt country. Over the past two decades, government leaders wanted to attract potential investors. To that end, Mexico’s government made infrastructure improvements and raised competitive stakes in telecom, transportation, and energy sectors. PwC analysts predict that Mexico will climb to be the world’s seventh largest economy by 2050.
If you’re here, you’re wondering about how to start a business in Mexico. First, recognize that setting up a company in Mexico is easier than ever before. However, that doesn’t mean that starting a business in Mexico is easy. Foreign investors should know the steps involved in starting a business in Mexico and expect delays along the way.
10 Steps to Starting a Business in Mexico
1. Submit to Mexico business registration
Visit Gob.mx and click the authorization button. It’s possible to do some of the administrative steps to starting a business in Mexico online. The Secretaria de Economia (Mexican Department of Trade) must grant the use of the business name. If you prefer to do this step with notário publico (notary public), that’s okay. The notary may be helpful by providing standard text needed to start a new company or vary an existing deed of incorporation.
2. Draw up the business’s acta constitutiva (deed of incorporation)
If you’re a serial entrepreneur, you may submit up to five business names at once. Starting a business in Mexico requires organization at the start. Include the business’s approved name, business type, intended activities as well as names and addresses of owners and their shareholdings.
3. Sign the deed of incorporation
Starting a business in Mexico is a step-by-step process. Perform this step before a notário publico in the presence of all business socios (owners) identified in the deed.
Present identification documents for each owner. A citizen of another country must provide a passport from his or her country plus proof of legal residence, such as a tourist visa or residence permit from Mexico. Mexican owners of the business must present identification, such as a passport, Cédula Profesional, or Voter’s Registration Card. All owners must present the comprobante de domicilio, or proof of address, such as a recent utility bill less than three months old.
The notary returns at least a single certified deed of incorporation copy (without the owners’ signature(s)) to simplify the rest of the stages of business formation in Mexico. When all stages have been performed, the notary delivers one or more certified copies of the signed deed. The notary retains the original and registers the business with the Registro Público del Comercio del DF in Mexico City.
4. Register the business’s address
Take this step to obtain the domicilio fiscal, or registered business address. Typically, this is the principal address from which the business operates or may be that of a third-party provider if the business is operated from home. Many foreign investors prefer to engage a third-party provider at this stage of starting a business in Mexico.
5. Register with the Mexican tax authorities (SAT)
Starting a business in Mexico must include one or multiple visits to Servicio de Administración Tributaria (SAT). This step may be performed at a local SAT office. If the business plans to operate in more than one Mexican state, other local SAT offices must be contacted. An individual with power of attorney, or poderes, may perform this step if he or she is so designated in the business’s deed of incorporation.
The SAT will request the certified (copy) of the deed of incorporation, proof of registered business address (e.g., a recent utility bill), and identifying documents of the individual performing the registration. A non-citizen must present a passport, residence card, or tourist visa.
6. Retail shops must notify the local delegación
Mexico’s citizens are robust consumers or foreign-made goods so, if this is your business idea, take the requirement in stride. This step may be initiated online but, if the local government needs more information, the business owner(s) may be required to appear in person. In some instances, separate permits may be needed for the business. Owners should seek legal advice if they want to open a business that serves the general public in Mexico.
7. Register employees of the business
When the business plans to hire Mexican citizens as employees (or plans to hire other ex-pat workers), it must register with the Mexican Social Security Institute, or IMSS as well as the Mexico National Worker’s Housing Fund, or INFONAVIT. If the business doesn’t have employees at the time of business incorporation, it may be okay to wait until the decision to hire employees is made. However, this step must be complete by the time the business contracts to hire the first employee.
Registration occurs at the local office of IMSS in the delegación in which the business is located. To find IMSS offices, search for Instalaciones Administrativas and the state in which the business is or will be located. For instance, if the business is located in Mexico City, select Distrito Federal. This step is complex. Requirements depend on the business’s activities.
After initial registration, most following interactions of the business, e.g. registering a new employee, with either IMSS or INFONAVIT may be accomplished online. Consult with a legal professional about the latest legislation concerning the hire of employees in Mexico to make sure you’re doing things the right way.
8. Register your business with the Mexico National Business Information Registry
Also known as SIEM, the National Business Information Registry is operated by the Secretaría de Economía, or Department of Trade. Search for contact information about the closest chamber of business for this purpose. The business will be charged a registration fee, determined by the number of employees.
9. Notify the Registro Nacional de Inversión Extranjera
If any of the business owners doesn’t have permanent resident status in Mexico, the business must register with the Foreign Investment Register, a part of the Department of Trade. The business send a designated person, with power of attorney (poder) to appear in person within 40 business days after incorporation.
The business must fill out the required paperwork and submit it with a certified copy of the deed of incorporation plus identification documents of the individual performing the step. In Mexico, the business is required to annual renew the registration. Depending on the type of business, the company may also be required to submit its quarterly report of income plus expenses.
10. Enroll with VUCEM
If the business is an importer, it must make an application to enroll with VUCEM. VUCEM is a central information depository of goods imported into Mexico. The federal agency ensures that regulations and requirements of all Mexican government agencies relating to a certain type of goods are relayed to the importer. VUCEM also provides the importer with required information about taxes, duties, and other charges. Note that it’s very much the responsibility of businesses to stay on top of what’s owed to federal agencies as well as vendors in Mexico.
Starting a business in Mexico as an American could be quite timely. Many economists believe that Mexico is poised to attract new investments as it becomes ever more business-friendly. Realize that the process of setting up a business in Mexico is decidedly more manageable today than in the past. The International Financial Corporation and the World Bank now rank Mexico in 36th place in the world for the ease of starting and running a business here.
That said, expect certain delays when you’re starting a business in Mexico, such as:
1. Obtaining Construction Permits
Plan on at least 70 days to manage construction permits. OECD says this is the norm. (Mexico’s average beats both the average for LatAm countries as a group and the Caribbean average.) Plan on approximately a month to get water and sewage connections.
2. Getting Electric Power
Getting the necessary single zoning certifications and inspections from Mexico’s Comisión Federal de Electricidad can be challenging but you can’t start without these permissions.
If you follow these basic steps, you’re well on your way to starting a business in Mexico.