How to start a business in Mexico from the United States: Step-by-step guide with strategies and benefits.

For American companies, establishing business ties with a neighboring country such as Mexico represents an invaluable opportunity due to the geographical proximity, which ensures fast response times, as well as effective communication thanks to similar time zones. Mexico, for its part, offers unique strategic conditions for attracting foreign investment: from a growing economy and a well-qualified workforce, to a privileged location that facilitates international trade. This article seeks to guide American entrepreneurs on the opportunities, requirements and benefits of doing business in Mexico.

What Makes Mexico Attractive to U.S. Entrepreneurs?

During the first two months of 2021, Mexico positioned itself as the United States' main trading partner, according to the U.S. Census Bureau. In 2020, 39.19% of the total foreign investment received in Mexico came from US companies, demonstrating a robust economic relationship based on mutual trust.

Mexico is also an attractive market for U.S. companies because of:

· Economic stability: Although it faces some challenges, Mexico has managed to maintain outstanding macroeconomic stability compared to many emerging countries.

· Advanced infrastructure: Mexico has ports, highways and a first-rate logistics system, facilitating trade with the United States and other regions.

· High consumption capacity: With more than 130 million people, demand for products and services continues to grow, especially in sectors such as technology, mass consumption, energy and manufacturing.

· Diversity of industries and sectors: Mexico offers a wide range of sectors for investment, from advanced manufacturing, renewable energy, technology, to tourism and real estate.

Advantages of operating in Mexico with a focus on Jalisco.

Operating in Mexico offers multiple benefits for U.S. entrepreneurs:

1.  Access to tax incentives: The Mexican government offers tax benefits and programs to attract foreign investment, especially in key sectors such as manufacturing, energy, technology and tourism.

2.  Diversified market: Mexico has a diversified economy with consumers in a wide range of sectors, from consumer products to advanced machinery and technological products.

3.  Geographic closeness: Proximity to the United States reduces logistics and transportation costs, facilitating the flow of goods between the two countries.

4.  Highly trained workforce: Mexico has a well-qualified and competitive workforce, with significantly lower costs than in the U.S., which can result in operational savings.

5.  Trade Treaties: The T-MEC (Treaty between Mexico, the United States and Canada) guarantees preferential conditions for US companies, facilitating trade and investment between the two countries.

Programs that encourage foreign investment in Mexico

The Mexican government has implemented several initiatives to encourage foreign investment. Some key programs include:

· Investment promotion programs: The Mexican government offers tax incentives and support programs to foreign companies that invest in strategic sectors, such as manufacturing, renewable energy, and information technologies.

· Special economic zones: Mexico has several economic zones where foreign companies can enjoy tax exemptions and other benefits.

Steps to open a company in Jalisco, Mexico from the United States

Although the process for opening a business in Jalisco, Mexico is accessible, it is essential to know and comply with country-specific regulations. The general steps for setting up a company in Jalisco, Mexico include:

1.  Select the right business structure: Options include Sociedad Anónima (S.A.), Limited Liability Company (S. de R.L.), among others

• General Commercial Companies Act (LGSM) - Article 6: Defines the different forms of commercial companies in Mexico, such as the Public Limited Company and the Limited Liability Company, and establishes the general rules for the constitution of companies.
• General Commercial Companies Act (LGSM) - Article 2: Establishes the general provisions on the constitution of a company and its objectives, including the responsibilities of the partners and the characteristics of the company.

2.  Register the business name: Ensure that the company name is available and registered with the appropriate authorities.

• Industrial Property Act (LPI) - Article 90: Establishes that the commercial name is a distinctive sign that can be registered and protected, provided that it is not generic or similar to other registered ones, to avoid confusion in the market.
• Industrial Property Act (LPI) - Article 89: Regulates the application for registration of the commercial name with the Mexican Institute of Industrial Property (IMPI).

3.  Get an RFC (Federal Taxpayer Register): The RFC is necessary to operate legally in Mexico and to comply with tax obligations.

• Federal Tax Code (CFF) - Article 27: Establishes the obligation of individuals and legal entities to obtain a Federal Taxpayer Register (RFC) from the Tax Administration Service (SAT) in order to carry out economic activities in Mexico.
• Federal Tax Code (CFF) - Article 29: Regulates the administrative procedures for obtaining the RFC, including the necessary documentation and processing deadlines.

4.  Comply with local regulations: This includes obtaining the necessary licenses and complying with safety and environmental protection regulations.

• General Law on Ecological Balance and Environmental Protection - Article 28: Establishes the obligation of companies to comply with environmental regulations and obtain permits when their activities may affect the environment.
• Financial Services User Protection and Defense Act (LPDUSF) - Article 8: Regulates the obligation to obtain certain licenses or permits to ensure that companies' business operations do not violate local laws.
• Administrative Procedure Act - Article 16 and 17: They regulate the administrative procedures for obtaining operating permits or licenses and the conditions under which the competent authorities must grant them.

5.  Open a business bank account: It is necessary to carry out business transactions in Mexico and to comply with tax requirements.

• General Law on Credit Institutions and Auxiliary Activities (LGIAAC) - Article 6: It regulates the constitution of banking institutions and the operations that banks can carry out in Mexico, including those related to the opening of accounts to foreign companies.
• General Law on Credit Institutions and Auxiliary Activities (LGIAAC) - Article 72: Establishes the conditions under which banks must operate and the requirements for a company to open a bank account with a Mexican institution.

6.  Hire a legal and tax advisor: It is crucial to work with experts who are fluent in both Mexican and U.S. laws to ensure compliance with local regulations.

• Federal Tax Code (CFF) - Article 34: Regulates the power of taxpayers to appoint a legal representative to carry out a company's tax activities, including advice on tax compliance.
• Taxpayer Defense Attorney's Office Act (PRODECON) - Article 6: Provides the legal basis for taxpayers' right to seek the advice of a taxpayer advocate or independent tax advisor.

Legal and fiscal aspects to consider.

Mexico has a different legal and tax system than the United States, so it's essential to understand how local laws operate. Some important points to consider are:

· Taxes: Mexico has a unique tax regime. Companies must pay income taxes, as well as value added taxes (VAT), depending on the type of activity.

• Federal Tax Code (CFF) - Article 2: Regulates the obligation of taxpayers to comply with tax provisions in Mexico, which include paying taxes, issuing electronic invoices and other tax procedures.
• Income Tax Act (LISR) - Article 1: Establishes taxpayers subject to Income Tax (ISR) in Mexico, which includes both foreign individuals and legal entities operating in the country.
• Value Added Tax Act (LIVA) - Article 1: It regulates the application of VAT to goods and services provided in Mexico, and establishes the tax rates that must be applied, which are essential for companies operating in the country.

· Labor regulations: It is necessary to comply with Mexican labor laws, which include regulations on wages, working hours and social security for employees.

• Federal Labor Act (LFT) - Article 1: Regulates labor relations in Mexico and establishes the rights and obligations of both employers and employees. It regulates aspects such as working conditions, salaries, benefits and employment contracts.

· Intellectual Property: Registering trademarks, patents and copyrights in Mexico is essential to protect your company's assets.

• Industrial Property Act (LPI) - Article 27: Regulates the registration and protection of trademarks and patents in Mexico. It is important for protecting the intangible assets of foreign companies.
• Industrial Property Act (LPI) - Article 90: Regulates the registration of trade names and other distinctive signs used in commerce.

Growth opportunities

Investing in Mexico allows U.S. companies to diversify risks, access qualified labor and competitive costs, and establish a presence in one of the most dynamic markets in Latin America. In addition, it strengthens the bilateral relationship between the two countries and opens up new business opportunities in key sectors such as advanced manufacturing, renewable energy, technology and e-commerce.

Conclusion

Collaboration between Mexico and the United States has always been a key driver for regional economic development. Although the process of starting operations abroad can present some challenges, the long-term benefits outweigh the initial challenges. Working with expert advisors, staying informed about current regulations and taking advantage of Mexican government incentives are essential steps to ensure the success of your business in Mexico.

With a growing economy, an expanding market, and a strategic location, Mexico offers American entrepreneurs an excellent opportunity to diversify their investments and expand their operations internationally.