Doing Business

Doing Business in Mexico 2015

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69 Doing Business in Mexico 2015 Chapter 9 Business entities Guide to "doing business" entities Choice of entity A potential investor, domestic or foreign, has free choice to operate through almost any form of entity. A stock corporation (S.A., S.A. de C.V. or S.A.P.I.) is the most commonly used entity for a subsidiary of a foreign corporation, although sometimes a general partnership with unlimited liability (Sociedad en Nombre Colectivo), a limited partnership (Sociedad en Comandita) or a limited liability company (Sociedad de Responsabilidad Limitada) is used, especially if the objective is that the Mexican entity be treated as a foreign partnership for tax purposes in the investor's home country, where applicable. A foreign corporation may also conduct most business activities through a registered branch or permanent establishment in Mexico, such as a Representative office with or without income. Government approval Prior authorization to use a specific corporate name is required from the Ministry of Economy (Secretaría de Economía) to form any business entity in Mexico. No approval is needed to amend its charter or bylaws unless the amendment involves either a change in the corporate name or the substitution of a provision allowing foreign participation for one prohibiting foreign participation. Certain activities may require prior authorization from the Foreign Investment Commission if the entity will be wholly, partially or neutrally owned abroad. See Chapter 5 for details on restrictions on foreign investments. Formation requirements The minimum share capital for a regular corporation established as an S.A., S.A.P.I. or S.A. de C.V. is that determined by the charter or bylaws of incorporation; it is customary that such minimum share capital be in the amount of $50,000 pesos, and every corporation must have at least two shareholders. After all necessary governmental authorizations have been secured; the charter and bylaws must be formalized pursuant to a public instrument executed before a public attester (notary public or public broker). The corporation must then be registered in the Public Registry of Commerce (Registro Público de Comercio) and with all tax and regulatory authorities, as the case may be. 9

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