Starting a Business in Mexico as a Foreigner: A Complete Guide

Mexico is the second-largest economy in Latin America.¹ With close economic ties to the US and a talented labor market, it can be an ideal location to start a business.

But the process of starting a business in Mexico as a foreigner can be challenging. Legal hurdles, language barriers and bureaucracy can stand in your way.

Here’s a complete guide to starting a business in Mexico as a foreigner, to help make the challenge one step easier.

Can I Start a Business in Mexico as a Foreigner?

In short, yes—you can start a business in Mexico as a foreigner.

In fact, you can own 100% of your business, without needing to partner with a local. You can even start a business without ever stepping foot in Mexico, through power of attorney.

This is outlined in Article 4 of the Mexican Foreign Investment Law.²

That said, there are some industries that exclude foreigners.

Article 5 lists the industries that are for the Mexican state only. These are:

• Exploration and extraction of oil and other hydrocarbons
• Planning and control of the national electric system, as well as the public services of transmission and distribution of electricity
• Generation of nuclear energy
• Radioactive minerals
• Telegraph
• Radiotelegraphy
• Postal service
• Banknote issuing
• Minting of coins
• Control, supervision and surveillance of ports, airports and heliports
• Any other industries as specified in applicable legal provisions

There are also certain industries that are reserved for Mexican citizens only. These are laid out in Article 6 and include:

• Domestic land transportation for passengers, tourism and freight (excluding messenger and courier services)
• Development banking institutions, under the terms of the law governing the matter
• Rendering of professional and technical services as specified in the applicable legal provisions

Certain industries also restrict the percentage of foreign investment allowed. These industries are listed in Article 7 and include:

Up to 10% foreign investment:

• Cooperative companies for production

Up to 25% foreign investment:

• Domestic air transportation
• Air taxi transportation
• Specialized air transportation

Up to 49% foreign investment:

• Manufacture and commercialization of explosives, firearms, cartridges, ammunition and fireworks (excluding acquisition and use of explosives for industrial and extraction activities nor the preparation of explosive compounds for use in said activities)
• Printing and publication of newspapers for circulation solely throughout Mexico
• Series “T” shares in companies owning agricultural, ranching, and
• forestry lands
• Fresh water, coastal, and exclusive economic zone fishing (excluding aquaculture)
• Port pilot services for inland navigation under the terms of the law governing the matter
• Shipping companies engaged in commercial exploitation of ships for
• inland and coastal navigation (excluding tourism cruises and exploitation of marine dredges and devices for port construction, conservation and operation)
• Supply of fuel and lubricants for ships, airplanes, and railway equipment
• Broadcasting

Certain industries allow you as a foreigner to have an investment greater than 49% in the company. But you’ll need approval from the National Commission of Foreign Investment. These industries are:

• Port services in order to allow ships to conduct inland navigation operation, such as towing, mooring and barging
• Shipping companies engaged in the exploitation of ships solely for high seas traffic
• Companies with permissions or concession for public service aerodromes
• Private education services of pre-school, elementary, middle school, high school, college or any combination
• Legal services
• Construction, operation and exploitation of general railways, and public services of railway transportation

📌 So while it’s perfectly possible to start a business as a foreigner in Mexico, keep in mind that certain industries restrict your investment abilities.

Starting a Business in Mexico as a Foreigner: Options to Get Started

When starting a business in Mexico as a foreigner, you have some options. Specifically, you’ll need to decide how you want to start your company.

There are 3 ways to go about starting a business in Mexico as a foreigner:

• Incorporate a company in Mexico
• Use an Employer of Record (EOR)
• Buy a shelf company in Mexico

Here’s an overview of each of these options.

Incorporate a company in Mexico

Incorporating a company is the most traditional way of starting a business in Mexico as a foreigner.

This begins with appointing a legal representative for your business. Legal representatives can be either Mexican or foreign nationals with a work permit for Mexico. They’ll represent your business through the entire set up process and help you navigate bureaucracy. They’ll also represent you through power of attorney.

You’ll also need to decide on your business structure. Typically, you have two choices:

• Sociedad Anónima (Corporation)
• Sociedad de Responsabilidad Limitada (Limited Liability Company)

You’ll then need to provide identification for beneficial owners and shareholders, draft your company’s bylaws and decide on a name. You can then incorporate your business in the presence of a Notary Public.

After this, you’ll still need to register with the Public Property and Commerce Registry. You’ll also need to register for a tax ID number and open a corporate bank account.

Overall, incorporating your business will give you the greatest level of control. It’ll enable you to start your business from the ground up. But keep in mind that it’s a long process.

Use an Employer of Record (EOR)

In contrast, the quickest option when starting a business in Mexico as a foreigner is to use an Employer of Record (EOR).

An EOR is a third-party entity with a legal presence in Mexico. Your EOR will handle the entire compliance process. They’ll enable you to quickly begin hiring Mexican employees and get going with your business. This enables you to test the market without making major commitments.

Your EOR also takes on the legal risk, as they’re accountable for complying with Mexican labor laws. That means they’ll handle everything from payroll to benefit administration.

The drawback to using an EOR is that you have less control over the process. You’ll also incur higher costs in the long-run as you increase your Mexican workforce.

Buy a shelf company in Mexico

Your last option is to buy a shelf company in Mexico. A shelf company is simply an inactive company that already exists.

That means it’s already gone through the lengthy and bureaucratic process of incorporation. Buying a shelf company therefore enables you to bypass this lengthy wait time.

However, buying a shelf company costs a significant amount. That’s because you’ll need to buy the equity stock from the business’s owners.

You should also keep in mind the legal risk involved in buying a shelf company. While it’s perfectly legal to buy a shelf company, it comes with two risks.

First, if the company has been involved in fraudulent or irresponsible activity, it may have hidden debts, liabilities and lawsuits that will be transferred to you upon purchasing it. This could pose a huge risk to your financial well-being.

Second, keep in mind that it’s illegal to purchase a shelf company to leverage its credit score.

The longer established a company is, the greater its credit history tends to be. This plays a crucial role in determining its credit score. In turn, this makes it easier to obtain financing and government contracts compared to young businesses with zero credit history.

⚠️ Purchasing an established company to benefit off its credit score and obtain financing you couldn’t otherwise receive is illegal. So make sure you consult legal experts before going down this path.

Step-By-Step Process of Starting a Business in Mexico as a Foreigner

Here’s the full process for starting a business in Mexico as a foreigner.

Decide the Business Name

Your first step to starting a business in Mexico as a foreigner is deciding on a name.

You’ll need to apply for a name with the Mexican Ministry of Economy. It’s best to submit a few different name ideas. This way, you’ll save time if one name is rejected, assuming another one of the names is accepted.

💡 You can use a free business name generator to help you decide on your business’s name in Mexico.

Choose the Entity Type

The next step when starting a business in Mexico as a foreigner is to choose your business’s structure.

This is a case of deciding between forming a Sociedad Anónima (Corporation) or a _Sociedad de Responsabilidad Limitada _(Limited Liability Company).

A _Sociedad Anónima _(SA) is the equivalent of a US corporation.

There’s no minimum capital requirement, and you can issue equity freely to raise capital. An SA can have an unlimited number of shareholders, but a minimum of 2 are required.

As an SA, shareholder assets are protected. Liability is limited to equity held.³

A Sociedad de Responsabilidad Limitada (S. de R.L.) is the equivalent of a US limited liability company.

A S. de. R.L. offers limited liability for its shareholders, who are called partners. A S. de. R.L. must have a minimum of 2 partners and a maximum of 50.⁴

There are fewer requirements for setting up a S. de. R.L., which can make it an attractive option. However, equity is limited to 50 partners and shares can’t be traded publically.

Submit a Request to the Ministry of Foreign Affairs (SRE)

Once you’ve decided on your preferable entity type, you’ll need to submit a request to the Ministry of Foreign Affairs (SRE).

You’ll need to list the top 5 entity types for your prospective business, in preference order. The SRE will then confirm your eligibility for each type of entity structure.

Create and Sign the Deed of Incorporation

After you receive the green light from the SRE, you need to draft the deed of incorporation.

This is an essential document for your business. It includes your company’s articles of incorporation, bylaws and other key details.

You’ll also need to provide a record of all share certificates as well as the identity documents of each shareholder.

In the case that a shareholder is another company or trust fund, you will need to collect information on all the shareholders in that legal entity. This chain of identification continues until all shareholders have been identified. This can be time-consuming, but failure to do this can result in large fines.

This policy accounts for all beneficial owners of your company.

Once drafted, you need to sign the deed of incorporation in the presence of a Notary Public. The notary will make your business in Mexico official. The notary will also register your company with the Public Property and Commerce Registry.

Register the Company Address

After signing the deed of incorporation, you’ll need to register your company’s address.

Every business in Mexico must have a physical address.

Obtain the Company’s Federal Tax Identification Number

Once your company is incorporated with its own address, you can apply for a federal tax identification number. To do this, your legal representative will need to visit the Secretaria de Administracion Tributaria (SAT). This is the Mexican equivalent of the IRS.

Your legal representative will need to provide proof of your deed of incorporation, as well as their ID.

Register Your Business With the Foreign Investment Registry and the National Business Information Registry (SIEM)

As a foreigner without permanent resident’s status, you’ll need to register your business with the Foreign Investment Registry. This needs to be done within 40 days of incorporation.

You’ll also need to register with the National Business Information Registry (SIEM).

Open a Corporate Bank Account

Opening a corporate bank account is a key step in setting up your business in Mexico. However, it’s one of the last steps as you’ll need proof of incorporation, proof of address and a tax ID number to do this.

Having a corporate bank account makes it easy to pay employees in their preferred currency.

Register for Social Security

If you plan on hiring employees, you’ll need to register your business with the Instituto Mexicano del Seguro Social (IMSS).

This will enable you to make contributions to your employees’ social security—a key statutory employee benefit in Mexico.

Legal Requirements for Starting a Business in Mexico as a Foreigner

There are numerous legal requirements involved in starting a business in Mexico as a foreigner. Here are some of the main ones to keep in mind.

As mentioned, you’ll need to appoint a legal representative for your company. In fact, it’s a legal requirement to have a legal representative.⁵

Your representative can be either a Mexican national or foreigner with the legal right to work and live in Mexico. They’ll be responsible for completing many tasks on behalf of your company.

All companies must have a registered physical address in Mexico as well as a fiscal address. You’ll need to register this with the Servicio de Aministracion Tributaria (SAT).

As already discussed, it’s legally required for your deed of incorporation to be signed in the presence of a notary public. Notary publics are held in high esteem in Mexico and are trusted public officials. Their seal of approval provides legal evidence that you signed the deed of incorporation.

It’s also necessary to open a corporate bank account to start and conduct business within Mexico.

Minimum Requirements to Incorporate a Company in Mexico

Whether you choose to set your company up as an SA or S. de R.L., there are some minimum legal requirements you need to meet.

Your company will need a minimum of 2 partners if it’s an S. de. R.L. or 2 shareholders if it’s an SA.

You’ll also need a minimum of one director (sole administrator) to set up a corporation. In Mexico, there are no nationality requirements for the director.

Every company in Mexico also requires its own office address, where accounting and corporate books can be stored.

Luckily, there is no minimum capital requirement to incorporate a company in Mexico. This is decided among the shareholders.

Discover Wise Business: The Account for Businesses who Want to go Global

When starting a business in Mexico as a foreigner, it’s likely you’ll have Mexican suppliers, contractors and employees, not to mention the costs of setting up the business. Wise Business can help you pay your Mexican employees and contractors fast and save your business money along the way.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in 40+ currencies. You can get major currency account details for a one-off fee to receive overseas payments like a local. You can also send money to 160+ countries.

You can hold 40+ currencies in your Wise Business account, including Mexican Pesos (MXN). Convert between USD and MXN in your account with ease using the mid-market exchange rate. There are no hidden fees, saving you money on each conversion. This makes life easier when starting a business in Mexico, as you’ll end up spending less on your start-up costs.

Register with Wise Business 🚀

Wise can also send you rate updates, enabling you to convert your funds at the optimum time.

You can use Wise’s batch payment tool to pay up to 1,000 payees in a single click. This makes it perfect for handling your workforce in Mexico.

🔍 Read the guide on how to open a Wise Business account

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Sources:

1. Latin America & Caribbean: GDP by country 2022 | Statista
2. FOREIGN INVESTMENT LAW
3. What is a Sociedad Anonima in Mexico
4. The Mexican LLC: S de RL de CV | Start-Ops Mexico
5. Ley General de Sociedades Mercantiles Capítulo I - De la Constitución y Funcionamiento de las Sociedades en General

All sources checked March 2024.