If you're looking to do business in Mexico, understanding what business structures are offered is a crucial step in deciding which one may be best for you and your company. Here is a basic overview of the seven business structures available in Mexico according to the Ley General de Sociedades Mercantiles (General Law of Mercantile Corporations).
1. Sociedad en nombre colectivo - General Partnership
A business entity where all partners have unlimited liability for the company's debts and obligations to the extent of their personal assets.
Example: "Lopez & Herrera Consultores"
A consultancy business where both Lopez and Herrera are experts in business strategy. Both partners actively provide consulting services, and both are liable for any debts the business might incur.
2. Sociedad en comandita simple - Simple Limited Partnership
A blend of general and limited partnerships.On one hand, there are the general partners who bear unlimited liability and actively manage the business. On the other hand, there are the limited partners whose liability is limited to their contribution but who do not engage in day-to-day operations.
Example: "Mendez Production & Associates"
Mendez oversees the operations of a film production company and holds unlimited liability. A group of investors (the associates) have invested money but do not take part in the day-to-day running or decisions of the business. Their liability is only up to the amount they've invested.
3. Sociedad de responsabilidad limitada- Limited Liability Company
Similar to the LLC structure in the U.S., S de RL is an entity where the liability of the partners is limited to their capital contribution. This type of structure is often suitable for small to medium-sized businesses, and ensures that personal assets of partners are generally protected from business debts.
Example: "Guerrero Tech Solutions, S. de R.L."
A tech startup specializing in software development. The founders have contributed varying amounts of capital and receive profits proportionally, but if the company goes under, they are only responsible up to the amount of their contributions.
4. Sociedad anónima - Corporation
A business structure where ownership is divided into shares of stock. Shareholders' liability is limited to their investment. A sociedad anónima is highly flexible in terms of capital and number of shareholders, it's the most common structure for large businesses in Mexico.
Example: "Baja Resorts, S.A."
A luxury resort chain spread across Mexico's coastline. The company has raised funds by issuing shares, and these shareholders receive dividends but are not directly responsible for the company's debts beyond their share value.
5. Sociedad en comandita por acciones- Joint Stock Partnership
A fusion of the simple limited partnership and the corporation. It's made up of both general and limited partners, but the capital is divided into shares. General partners manage the business and have unlimited liability, while limited partners are shareholders with liability only up to their share of the capital.
Example: "Vega Mining & Shareholders, S. en C. por A."
Vega, a general partner, runs a mining operation. Investors can buy shares in the venture, benefiting from its profits. While Vega manages the operations and holds unlimited liability, the shareholders' liability is limited to their investment.
6. Sociedad cooperativa- Cooperative Society
An entity formed by individuals (not companies) who have common economic, social, and cultural needs and aspirations. Profits and losses (limited) are shared among members based on their participation.A sociedad cooperativa is democratically operated, meaning each member typically has one vote regardless of their capital contribution. It's aimed at mutual benefits rather than just profit.
Example: "Agricola Verde Coop"
A group of farmers forms a cooperative to collectively purchase equipment, share resources, and market their produce. Each farmer contributes an equal amount and has an equal vote in decisions, regardless of the size of their farm.
7. Sociedad por acciones simplificada - Simplified Joint Stock Company
A type of mercantile company that can be formed by one or more individuals (not companies) through electronic means, without the intervention of a public notary. Additionally, shareholders are only liable for the amount they have invested in the company. This structure provides a streamlined process for entrepreneurs, allowing for easy online registration and operation with limited bureaucracy. The ease of starting up can make it an attractive option for small businesses and startups.
Example: "Delicias Artisan Breads, S.A.S."
Maria, a passionate baker, decided to transform her hobby into a business. Using the online portal provided by the government, she quickly established her own company to sell artisanal breads without the need for complex paperwork or a notary. She's now the sole owner of this joint-stock company, making decisions and enjoying the profits on her own.
Stay tuned for additional articles on corporate law in Mexico! By gaining insight into these diverse business structures, businesses and entrepreneurs can better equip themselves to make informed decisions about the most suitable structure for their specific needs in Mexico.
For more information on how to incorporate your business in Mexico, email info@BlackSheepLaw.Co or our Founder and Partner Hilda Castillo Castrejon at Hilda@BlackSheepLaw.Co . Think outside the box!