Doing Business

Doing Business in Mexico 2015

Issue link: http://read.pwc.com/i/434024

Contents of this Issue

Navigation

Page 92 of 259

79 Doing Business in Mexico 2015 Partnership The General Law of Mercantile Companies also provides for partnerships (Sociedades en Nombre Colectivo), as well as for partnerships with limited and unlimited liability partners (Sociedades en Comandita), but as a result of the unlimited liability (lack of corporate veil) of all or the general partners, as the case may be, these business forms are not common. These business forms have most of the attributes associated with the U.S. concept of a partnership because of the unlimited liability of the partners so designated. Partnerships require at least two partners. Civil partnership Professional practitioners are usually organized as a civil partnership (Sociedad Civil –S.C.), which resembles in many ways the limited liability partnership (S. de R.L.) mentioned above. The managing partners have unlimited liability, while other partners' liability is limited to the value of their contributions (2704 Civil Code). This form is also used by some non-profit entities such as educational establishments. By definition, these entities should not engage in commercial operations (any activities involving commercial speculation). The transferability of rights, as well as the admission of new partners, is subject to approval of all the partners. In general, a civil partnership is taxable in the same manner as a corporation. However, civil partnerships involved in educational, cultural, and other activities specifically listed in the Mexican income tax law may be classified as non-taxable entities if a specific authorization is obtained. Distributions of interim profits to the partners are treated as deductible salaries (fully deductible by the S.C.), and distributions of retained earnings are treated as corporate dividends. Joint venture contract The joint venture contract (Asociación en Participación–A. en P.) is one whereby a person grants a participation in the profits and losses of a specific venture or business to others who provide property or services. Such a contract has no legal personality, i.e., a separate legal entity is not created, and operations are conducted in the name of the active managing joint venturer (asociante). The joint venturer (asociante) is the only one with any direct liability to third parties. The silent partner (asociado) has no direct relationship with third parties. The tax treatment applicable to the Asociación en Participación is essentially the same treatment as regular corporations solely for tax purposes. See Chapter 19 for additional tax aspects of the joint venture contract. Legal requirements for a valid joint venture contract are minimal. Basically, the contract should identify the contracting parties; specify the contributions and obligations of each under the contract, the purpose of the venture and the life of the contract; and establish the method for distributing profits and losses. Formation procedures A joint venture contract need not to be registered, although a signed written agreement must exist. 9

Articles in this issue

view archives of Doing Business - Doing Business in Mexico 2015