Mexico is and has been a very popular destination for Canadians, either for tourism or as a winter or permanent home for retirees and early retirees. In 2015, 1.8 million Canadians travelled to Mexico, while more than 50,000 Canadians reside in the country.
Many of these early retirees have thought about starting a business. In this article, I will describe a few steps that I would suggest you follow in order to make a soft landing for your project.
Get legal/professional advice. Every person who would like to start a business and has already done his/her due diligence will need at some point professional advice, even in his/her own country. In this specific situation, it is recommended that you seek a qualified professional to assist you, regardless of how well you speak Spanish and even if you’re married to a Mexican.
As I mentioned before, Canada has a very well established community in Mexico, as well as a number of diplomatic representations (Embassy of Canada to Mexico in Mexico City www.canadainternational.gc.ca/mexico-mexique, the Consulate General of Canada in Monterrey, the Consulate of Canada in Guadalajara, and various Consular Agencies around the country), that can provide you with a list of legal services providers, either an attorney or a Notario Público (a specialized attorney with advanced legal knowledge, who participates in commercial and civil matters as a public attester and legal adviser to investors, entrepreneurs and individuals).
Get the proper visa if you are planning to own a business. In this case you would have to apply before the Instituto Nacional de Migración http://www.gob.mx/inm and the experience of an attorney of immigration can help you with this matter. You can always call the consular offices of Mexico in Canada before leaving to Mexico; there are Mexican consulates in Toronto, Montreal, Vancouver, Calgary, Leamington and the Embassy in Ottawa.
Corporate formation. With the assistance of the attorney or Notario Público apply to obtain the approval of your corporate formation. They will be able to help you to determine the best corporate accounting and tax structure for your business. There are several corporate forms to choose from. The most common type of business used in Mexico is the Sociedad Anónima de Capital Variable (S.A de C.V) which is a negotiable stock corporation of two or more persons whose liabilities for the acts of the corporation are limited to their capital contribution, this is the most common type of business used in Mexico.
The Sociedad de Responsabilidad Limitada (S. de R. L.) and the Sociedad de Responsabilidad Limitada de Capital Variable (S. de R.L. de C.V.), these are nonnegotiable stock limited liability corporations of two or more persons whose liabilities for acts of the corporation are limited to their capital contribution, these are similar to a closed corporation “Inc”. For both the S.A. and the S. de R.L. the option of variable capital (CV) can be established, thus permitting the increase or decrease of capital with minimized formalities. And the third one is the Sociedad Civil, S.C., a civil enterprise mostly used by professional service providers, such as lawyers and accountants, which has no minimum capital requirements. There are no limits on the number of partners, but each one is liable for obligations and debts.
Procedures before several government agencies. Depending on the location of your business you will have to follow different procedures, but the most common paperwork that you would have to complete is:
1) Obtain the authorization of using the company name at the Ministry of Economy http://www.economia.gob.mx/en; and file the draft deed of incorporation with the notary. This is a federal procedure regulated by the General Commercial Law, the Organic Law of the Federal Public Administration, the Foreign Investment Law and the Regulations for the Authorization of Use of Company Names;
2) Sign the deed of incorporation before a notary public, obtain the Tax Registry Number (RFC) and file the deed of incorporation with the Public Register of Commerce;
3) Register with the Mexican Social Security Institute (IMSS) http://www.imss.gob.mx;
4) Register with the local tax administration, in most cases is with the Secretaría de Finanzas at State level (Ministry of Revenue);
5) Notify the local government of the opening of a mercantile establishment and
6) Register with the National Business Information Registry (Sistema de Information Empresarial, SIEM). The company will be registered with the specific chamber corresponding to its corporate purpose or activities.
It is important to mention that Mexico stands in the 38th rank from 189 countries studied, in the 2016 report from the World Bank Ease of Doing Business.
Finally, I would just like to highlight that you should take into account that there are important business and government cultural differences between Mexico and Canada, to name a few:
1) Business in Mexico is done face to face not by email.
2) Building a personal relationship is important before starting a business.
3) Daily life goes slower, even in business, so don’t be impatient.
4) Even though many people in Mexico can communicate in English -especially in the tourist areas-, Spanish is the business language, therefore it is recommended that you translate all formal documents and contracts so you can fully understand what you are signing.
Good luck and enjoy the people, the weather and the food!
Please note that this is the first part of a series of two articles, regarding business in Mexico. The next one will be on how to invest in Mexico as a Canadian SME.
María-Fernanda Suárez is a specialist in the bilateral trade relationship between Mexico and Canada.