How to create a company in Mexico

Are you thinking of setting up a company in Mexico and don’t know whether to create a Public Limited Company (SA), a Limited Liability Company (S de RL) or a Civil Company (SC)? Here I explain what you need.

Each company is different, and its personal characteristics define the way in which it should be incorporated, for convenience or functionality. In the following lines, we will discover together which is the path you should take to register your new company (or Firm in case you are dedicated to providing professional services).

The first thing you should know is that in Mexico there is the General Law of Commercial Companies (LGSM), which is responsible for regulating the types of companies that can be created in Mexico. This law recognizes 6 types of companies. In addition, there is the Civil Code, which regulates civil societies and associations. Finally, we have the Commercial Code, which regulates commercial acts. These three rules will be useful in case you have specific questions about the company you are going to create and that you do not find explained in this article. Additionally, if you are a foreigner and want to create a company in Mexico, it will be convenient for you to also know that there is the Foreign Investment Law.

Types of company to take into account

Of all the companies that can be created, here we are going to talk in general only about three, which are the most common:

The Public Limited Company (SA), regulated by the General Law of Commercial Companies
The Limited Liability Company (S de RL), regulated by the General Law of Commercial Companies
The Civil Company (SC), regulated by the Federal Civil Code and the Civil Code of your State

For these three types of companies you will need to carry out the following procedures:

1. The first thing you should know is that in all cases you need at least 2 partners. Here it is important that you define if the partner you are going to choose is an active partner who will participate in the company or a passive partner that you will use only to comply with the requirement of having 2 partners. In the first case, it is very important that both of you have clear rules between partners, so it will be very important that you clearly define the statutes of the company, for which it is recommended that you hire a team of lawyers to help you draft them. In case your partner is passive, then it is recommended that he has a very minimal participation (recommended 1% or less) and it is likely that with the statutes that the Notary helps you to draft where you make the constitution may be sufficient, although it is always advisable to have them reviewed by an expert.

2. Now it is important to define the activity that your company will carry out. The type of company you can create depends on this. In addition, in the case of foreign partners, there are some activities in which it is mandatory that there are Mexican partners with a certain participation. There are few activities that require Mexican partners and in my experience, of all the companies that we have created for foreigners, we have done 99% with 100% foreign partners. Now, let’s see the commercial activity of your company.

The Public Limited Company (SA). It allows practically any activity of production, manufacturing, commercialization and services, as long as they are legal in Mexico. This type of company is the most used in Mexico because it is the most versatile, even if you need to transform it later into another type of company as the complexity of your business scales. It is governed by shares. Each partner owns a certain number of shares and the value in decision-making is governed more by the participation of money that he owns.
The Limited Liability Company (S de RL). Like the SA, it allows practically any activity of production, manufacturing, commercialization and services, as long as they are legal in Mexico. This type of company is also very common in Mexico, but it does not have as much versatility as the SA. It is governed by social participations, that is to say that in it the person is more important at the moment of making decisions.
The Civil Company (SC). This type of company only applies to the provision of services and focuses on the professional activities carried out by the partners and their associates. It is used to group a team of professionals who perform PERSONAL SERVICES, so that they can do so under a Firm instead of doing it individually. This type of company is governed by social parts contributed by the partners, so, at the time of making decisions, the person is more important.3.-In all three cases, it is a Notary who, in general, carries out the procedures. The Notary will create a CONSTITUTIONAL ACT that will include all the data of your company, the statutes and the transitory articles, which will be the first agreements that the partners make regarding the creation of the company.
Regarding capital, none of the three companies has a minimum amount of capital. When they ask me what amount of capital to choose, I usually recommend that they decide on investment capital or operating capital and if necessary, mix both. What do I mean by this?
Investment Capital. If your company has to carry out special installations or acquire certain equipment to operate, the partners can decide what minimum amount they need to contribute so that the company can start operations so that the first equipment, installations and necessary goods are purchased and the company can function.
Operating capital. If your company does not need an investment in equipment or facilities, it is likely that during the first months it will need an injection of capital to carry out the normal expenses of the business while it begins to generate its first income. This may take 3, 6 or 12 months, so all you have to do is calculate the approximate amount of expenses that they will have at the beginning per month and then multiply it by the number of months that they estimate that the business will not have income.
Now it is time to choose the name. I recommend that you have at least 3 names and preferably 5, ordered by priority, starting in number one with the one you want your company to stay with (the recommendation to number them seems obvious, but I have already seen this kind of errors in which the company ends up being called as they did not want). The idea is that you have a second option at hand in case one is already registered by another company.

3.- In all three cases, it is a Notary who, in general, carries out the procedures. The Notary will create a CONSTITUTIONAL ACT that will include all the data of your company, the statutes and the transitory articles, which will be the first agreements that the partners make regarding the creation of the company.

4.- Regarding capital, none of the three companies has a minimum amount of capital. When they ask me what amount of capital to choose, I usually recommend that they decide on investment capital or operating capital and if necessary, mix both. What do I mean by this?

Investment Capital. If your company has to carry out special installations or acquire certain equipment to operate, the partners can decide what minimum amount they need to contribute so that the company can start operations so that the first equipment, installations and necessary goods are purchased and the company can function.
Operating capital. If your company does not need an investment in equipment or facilities, it is likely that during the first months it will need an injection of capital to carry out the normal expenses of the business while it begins to generate its first income. This may take 3, 6 or 12 months, so all you have to do is calculate the approximate amount of expenses that they will have at the beginning per month and then multiply it by the number of months that they estimate that the business will not have income.

5.- Now it is time to choose the name. I recommend that you have at least 3 names and preferably 5, ordered by priority, starting in number one with the one you want your company to stay with (the recommendation to number them seems obvious, but I have already seen this kind of errors in which the company ends up being called as they did not want). The idea is that you have a second option at hand in case one is already registered by another company.

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6.- With the name and type of company, the permission to constitute the company is processed before the Ministry of Economy. It is important to remember that this permit is only valid for 60 days, so it is important that the Notary constitutes the company and gives notice that the company has already been created and the permit was used so that it is not lost.

7.- Data that your deed or constitutive act will contain. If you hired a team of lawyers or the Notary does the act, it is important that in both cases you have a DRAFT of statutes and a DRAFT of constitutive act, so that you and your partners can review it very calmly and see if there are important changes that they want to make. It is recommended that the team of lawyers you hire help you by explaining each of the paragraphs. The data that your deed or constitutive act must contain are the following:

Notary data and place of constitution
Data of those who appear to create the constitutive act
Statutes
- The name of the company and data of the name permit of the Ministry of Economy
- The address of the company. City and State of the Republic where it is created.
- The corporate purpose. A broad and detailed description of the activities to which the company may be engaged. If there is a future activity that you want to do and this is not included, you must ask a Notary again to expand the corporate purpose or you will not be able to do it with this company, so be creative and think about the future in everything you can do with your company. Your team of lawyers will help you make the legal adjustments to each activity and will expand it as much as possible.
- The duration of the company
- The amount of Capital and the types of capital that may exist
- The structure of the shares or social parts, their value and their conditions
- The description of the shareholders’ meeting and the holding of ordinary and extraordinary meetings
- The administration of the company to know if it will be represented by one person or by several. In the first case it is called Sole Administrator (in the SA), Managing Partner (in the SC) or General Manager (in the S de RL). In the case that there are several people who administer it is called Board of Directors (in the SA), Managing Partners (in the SC) or Board of Managers (in the S de RL).
- The description of the powers that the Legal Representative of the company will have, who is the Sole Administrator (in the SA), the Managing Partner (in the SC), the General Manager (in the S de RL) or the President of the Board, when a board of directors has been appointed (in the SA), board of managers (in the S de RL) or a group of managing partners in the SC.
- The supervision of the company. In the case of an SA, a Commissioner of the company must be appointed, who will supervise the administration. In the case of the S de RL, the appointment of a Commissioner to supervise the administration is optional. The SC does not require as a formality to have a Commissioner, because the partners can supervise and ask for accounts at any time to the managing partners.
- The rules for the distribution of profits and losses
- The designation of the reserve fund
- The dissolution and liquidation
- The clause that indicates whether or not foreign citizens will be accepted as partners.
The transitory clauses in which it is defined:
- Who will be the partners, the shares or social parts that they acquire, the value of said shares or social parts, the type of shares, if applicable
- The agreements on how the company will be administered
- Who will be the commissioner, when applicable
- Whether or not there will be guarantees from the administrators, in the case of the SA
- The receipt of the initial capital of the company by the administration
- The duration of the social year
- The appointment of attorneys-in-fact, their names and the powers that are conferred to them
- The appointment of the person who will register the company in the RFC
The personality of those appearing at the signing of the constitutive act: Name of each member; Nationality and address; identification that they provide.
The complementary notes
The insertion of articles of the laws that the Notary deems convenient to justify the creation of the company and the granting of powers

Articles of Incorporation

The constitutive act, after being signed, has to be presented in the SAT to request the registration of the company in the RFC (Federal Registry of Taxpayers). Then it must be taken for registration in the Public Registry of Commerce and notify the Ministry of Economy that the permit for the name and type of company was used.

Variable Capital

An important issue is the variable capital. The SA and the S de RL can be variable capital companies, so they must add the termination CV, that is, S.A. de C.V. or S. de R.L. de C.V. Variable capital is a characteristic that allows companies, without modifying the fixed capital with which the company was created, to increase their capital by subsequent contributions from the partners, the admission of new partners, or decrease by partial or total withdrawal of contributions, as long as these are of a variable nature. For this, the constitutive act of the variable capital company must contain a special section that indicates the conditions that are set for the increase and decrease of the variable capital.
Finally, it is important to remind you that all the above data was written in a colloquial (not legal) way and for informational purposes, as a general guide so that you know what your constitutive act should contain and some of the requirements that you will need to constitute your new company. Each company is different and probably some of the data may be inaccurate or not applicable to your type of company. In this sense, it is important that, if you need more specific information, you contact your team of lawyers or me, for any advice you require.

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With more than 20 years of experience in digital strategies and business consulting, I help you create your company in Mexico in a clear, safe and efficient way. My approach combines strategic vision, optimized processes and transparent communication so you can make decisions with confidence.

Conclusion

Creating a company in Mexico is a strategic process that requires clarity in the choice of legal regime, regulatory compliance and business vision; having expert advice ensures that the business starts solid and without risks.

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