There are many different options available for overseas companies to conduct business in Mexico, which range from the least involved to a fully committed and active presence. Fortunately for the aspiring entrepreneur, there are many different options for a foreign company wanting to start a business in Mexico.
Starting the Business
One option involves that of a joint venture, trust, independent contractor, distributor, franchise, or agent. The main advantage of all of these is that an overseas company typically won’t face any kind of legal implications in Mexico. However, there are some cases in which income that’s domestically sourced could be subject to withholding tax. Additionally, the business itself could also qualify as a permanent establishment, which can result in the overseas company being deemed a Mexican tax resident.
This depends on the activities conducted by either the independent agent or contractor. The one major disadvantage is the business is dependent upon compliance via the contractual terms that have been agreed upon between the agent and the overseas company, so that needs to be worked out beforehand with an experienced Mexican business lawyer.
Another option to start a business in Mexico involves creating a Mexican branch. Under the Mexican Foreign Investment Law, an overseas company has the right to conduct business through a branch as long as they obtain authorization from the Ministry of Economy and register with the Public Registry of Commerce.
There are also a couple of downsides to conducting a business as a branch, which include the following:
- The overseas company will be liable for all responsibilities that are incurred by the Mexican branch.
- The overseas company is considered a permanent establishment in Mexico for tax purposes.
Business Requirements Under Mexican Law
Typically, any foreign company sets up a business in Mexico by either acquiring or creating a commercial company. Any foreign company that wishes to conduct business in Mexico regularly will need to meet the following requirements under Mexican law:
- Obtaining authorization from the Ministry of Economy.
- Registering a branch of the company with the Public Registry of Commerce, as well as the Foreign Investment Registry.
- Complying with Mexican law, as well as waiving the right to invoke any foreign laws and/or governmental protection for any and all matters involving business conducted in Mexico.
- Complying with any and all legal, licensing, and tax requirements involving activities conducted by the branch of the business.
Joint Venture Restrictions
Foreign companies can also conduct business in Mexico via a joint venture. However, Mexican foreign investment law mandates that foreign companies are forbidden from conducting certain activities, such as the following:
- Transportation and freight services.
- Development banking.
- Specific technical and professional services.
There are also specific provisions for foreign investors, meaning that:
- Foreign investment in certain sectors are limited.
- Prior authorization for foreign investments is required.
- Foreign investors will be required to operate through certain vehicles.
If you want to start or expand your business to Mexico, make sure you contact an experienced Mexican business attorney first. You will need an attorney that can help you navigate the business laws of both the United States and Mexico. We are based in both Jalisco and Texas and handle cases about documents, immigration, family law, personal injury, real estate, and more.