When doing business abroad it is always important to know how law may vary from one country to another, especially if we want to prevent or avoid having problems when executing a commercial contract.

If you are about to open a business, and need a corporate entity to operate it, surely you have asked yourself what are your options and legal implications exist, but more than anything, what type of organization best meets your needs. This article, divided in two, will touch on the this theme, first dealing with the theme of corporations in general and later delving into a deeper analysis of the two corporation types most used in Mexico, the “Anonymous Society” (S.A.) and the “Limited Responsibility Society” (S. de R.L.)

“Anonymous Society”

The corporation most used in Mexico is the “Anonymous Society” (which is similar to the Inc. of common-law tradition); however, the use of this type of corporation is more because of custom than because it properly matches the particular necessities of the of the determined business.

In Mexico Limited Liability Company (LLC) is known as a Sociedad de Responsabilidad Limitada (S.de R.L.) in Spanish.

  It has the same benefits and features as many LLC’s in the U.S. Foreigners can own all of the shares in a Mexico LLC. A Mexico LLC is a corporate entity (rather than a partnership) consisting of at least two shareholders who all enjoy limited liability. However, some countries (like the United States) treat a S. de R.L. like a partnership for tax purposes.

• Shareholders are only liable up to their contributions to the company.
• LLC’s cannot issue different classes of stock. However, a LLC may offer specific stockholders certain “privileges” regarding voting rights.
• Stock certificates are not issued. Stock ownership is verified by inclusion in the LLC’s Shareholders Register.
• Unless the Organizational Agreement states otherwise, each shareholder will have one vote for every 1,000 MX Pesos of contribution.
• Profits and losses are shared by the shareholders based on their percentage of share ownership of the company’s capital.

 

JOINT VENTURE

Given the flexibility of engaging in joint venture agreements, U.S. firms frequently use joint ventures and licensing agreements to establish a presence in Mexico. Although some Mexicans rely on verbal agreements when doing business, we highly recommend you sign a written joint venture agreement with your Mexican business partner. According to Mexican law, joint ventures are considered separate entities from their parent companies and must register separately to pay taxes.

To safeguard a license or patent against third parties, all licenses and patents in Mexico must be registered with the Mexican Institute of Industrial Property (Instituto Mexicano de la Propiedad Industrial or IMPI). Registering a license or patent entails a government review that can take four to six months. For more information on IMPI, please see the Intellectual Property section.