Doing business

Quick Guide for Doing Business

In this section you will find information regarding the schemes for doing business in Mexico, with a brief description of each on this schemes. Please bear in mind that this information is very basic and cannot be used to make any business decision.

There are at least 4 major ways of doing business in Mexico consisting of: Corporations and limited liability partnerships, Joint Ventures, Maquila program - IMMEX Decree, and Licenses.

Corporations and limited liability partnerships
The Mexican legal frame provides many options to incorporate companies with the benefit of limited liability for the stockholders or shareholders. However, the most common formats are:


 * Sociedad Anónima (S.A.), which is equivalent to Aktiengesellschaft (AG) in Germany.
 * Sociedad de Responsabilidad Limitada (S. de R.L.), which is equivalent to the Gesellschaft mit beschränker Haftung (GmbH) in Germany.

There are other corporate formats that are not so common, such as: Sociedad en nombre colectivo; Sociedad en comandita simple; Sociedad en comandita por acciones, and Sociedad cooperativa.

Bear in mind that the incorporation of a company in México is a contract, thus it its mandatory the agreement of 2 wills, either individuals or legal entities.

Here you can read more about the steps to be followed for the incorporation of a company in Mexico.

Joint Ventures
A joint venture involves a potentially long-term investment of funds, facilities and resources by two or more companies to a combined venture, which benefits all companies. Therefore, all involved will have an equity stake in the new venture, and consequently will share revenues, expenses and assets.

This kind of agreements or alliances allows you to partner with an existing business to share the risks and opportunities in Mexico. By pooling their money and personnel, companies enhanced their chances of developing advanced technological methods that would reduce exploration and production costs and increase profit margins.

Companies seeking to cut the costs of doing business see joint ventures as a way to save money, giving the fact they are sharing the risks that could arise from a particular project fail.

Bear in mind that a joint venture could take, at least, the following different forms: technology transfer, purchasing and distribution agreements, marketing and promotional collaboration, joint product development.

Finally, be advised that in Mexico there are no major formalities for the execution of a joint venture agreement.

Maquila program - IMMEX Decree
According to the Decree for the Promotion of the Manufacturing, Maquiladora and Export Services Industry (IMMEX Decree), the Mexican companies that have an authorization of the Ministry of Economy (IMMEX Program) could carry out the temporary importation into Mexico of raw materials without paying import duties and VAT. Also, the IMMEX companies are entitled to import fixed assets without paying the VAT.

The IMMEX program can be obtained if a taxpayer transforms or repairs materials, parts or components into finished goods, which are destined for exportation. Additional requirements have to be met, including maintaining a specific inventory control system that allows the authorities to track the imports and exports of the maquiladora.

Please consider that besides the benefit of the temporary importation, when certain conditions are met, the IMMEX program could avoid the exposure of a permanent establishment, and also it is possible to apply specific transfer pricing rules.

Shelter
A different way of doing business in Mexico is by means of a shelter agreement with a Mexican independent company. This facilitates the commencement and maintenance of manufacturing operations in Mexico without experiencing the high start-up costs and troublesome delays that might otherwise take place in a new environment.

In Mexico there are a number of companies that provide shelter services, and thus perform all the tasks that are essential to starting and operating a manufacturing facility in the country, eliminating any non-manufacturing distractions (permits, license, prescreen and hire employees, labor related tasks, transportation and customs).

Under this scheme the foreign investor should provide to the shelter the technology, know-how, and guidelines required for the manufacture to produce the goods.

In order to operate through a shelter company you will need to execute a toll manufacturing agreement, in which it should be precisely described the obligations of each party. No further formalities are required in Mexico.

Licenses
Another way of doing business in Mexico is through the granting of licenses to your Mexican business partners. A license may be granted by a party ("licensor") to another party ("licensee"), having the consequence that the licensor authorizes the use of specific licensed material to the licensee.

For example, a licensor may grant a license under intellectual property laws to authorize to a licensee the use of software or the use of a patented invention. For this purposes the license agreement would regulate the term, territory, renewal provisions, and other limitations that are important to the licensor.

Business practices such as franchising, technology transfer, publication and character merchandising depend on the licensing of intellectual property.