THE STRUCTURE OF YOUR MEXICAN BUSINESS ENTITY
This discussion is not intended as legal or tax advice, and cannot be relied upon for any purpose without the services of a qualified professional.
A first consideration is will your business simply hold real estate or will it be generating income. A close second is how much protection you want to provide against potential creditors.
Holding Mexican real estate may be accomplished in many ways, from in ones personal name, a trust or a corporation. Mexico taxes any gains on “non-principal residence” sales.
If you are operating a business in Mexico, your tax and legal professional will likely recommend a Mexico business entity.
The following describes a corporation, a partnership and a sole proprietorship:
The majority of expat business owners in Mexico set up a Mexican Corporation, the most common choice is the Sociedad Anonima De Capital Variable. This form is similar to a United States corporation. Shareholders receive limited liability and the capital may be changed easily. The minimum initial capital is approximately $4,500 U.S.
A Sociedad En Nombre Colectivo is the equivalent to a partnership, with again, the undesirable feature of unlimited liability to the partners. Setting up a Sociedad de Responsabilidad Limitada offers limited liability for all partners. Capital shares are provided to its members. These forms of organization are not used as often as is a corporation.
Only a Mexican Notario Publico can prepare a deed for real estate transactions. Unlike the U.S., the notary title in Mexico distinguishes an attorney who is appointed by the State Governor. They are responsible and legally liable for the accuracy of his/her work. The notary is ultimately responsible to the Mexican government.
In setting up a corporation, the use of a Notario Publico is required. A power of attorney is often used to allow an individual flexibility in their travel arrangements while conducting business in Mexico. The cost to set up a corporation or a limited liability LLC with foreign investors begins at approximately $2,000 U.S. Full year tax compliance services, including an annual tax return run from $1,000 U.S.
For legal and tax purposes, an individual is permitted to operate as an individual enterprise in Mexico. You are required to obtain a permit to work and you must be a resident, but not necessarily a Mexican national. As a sole proprietor, your liability is unlimited. Considering these issues and those of limited life and transferability, this is also not a recommended choice.