How to Set Up an Entity in Mexico

Setting up a legal entity in Mexico is a strategic way to access the broader North American market and participate in regional supply chains. The country offers a large consumer base, a skilled workforce, and strong trade ties with the U.S. and Canada.

At the same time, the incorporation process can be bureaucratic. Foreign investors must navigate the Tax Administration Service (SAT) for biometric registration, comply with strict beneficial owner reporting rules, and factor in long lead times for opening corporate bank accounts. Understanding these steps in advance is key to planning a realistic launch timeline.

Disclaimer: This content is for informational purposes only and does not constitute legal, tax, or financial advice. Always consult official sources before acting.

In Mexico, opening an entity involves constituting a commercial society via a public deed (Acta Constitutiva) before a Notary Public, who grants the document "public faith." This process transforms the business into a legal person distinct from its shareholders, capable of holding assets and incurring liabilities. The most common options for foreign investors are the Sociedad Anónima (Corporation) and the Sociedad de Responsabilidad Limitada (LLC), both typically variable capital entities.

Entity overview in Mexico

The registration process in Mexico is a hybrid of digital pre-approvals and mandatory physical presence for tax registration. Foreign investors overwhelmingly choose between the S.A. de C.V. and S. de R.L. de C.V., depending on their need for stock negotiability or US tax "pass-through" status.

Step-by-step guide: How to open an entity in Mexico

Step 1: Choose the right structure

In Mexico, the choice for an entity generally comes down to the Sociedad Anónima de Capital Variable (S.A. de C.V.) or the Sociedad de Responsabilidad Limitada de Capital Variable (S. de R.L. de C.V.). The "de C.V." suffix simply means "Variable Capital," allowing the company to change its capital without a cumbersome public legal process.

Sociedad Anónima de Capital Variable (S.A. de C.V.)

This is the standard model for a Corporation, similar to an "Inc." in the US.

• Best For: Companies aiming for high growth, future public offerings (IPO), or those that need to issue stock options to employees or attract Venture Capital (VC).
• Governance: It requires a more formal structure, including the mandatory appointment of a Statutory Examiner (Comisario) to oversee the Board of Directors.

Sociedad de Responsabilidad Limitada de Capital Variable (S. de R.L. de C.V.)

This is the Mexican equivalent of an LLC (Limited Liability Company).

• Best For: Closely held joint ventures or, most commonly, US-based parent companies seeking specific tax advantages.
• Tax Advantage: A major reason for US companies to choose the S. de R.L. is the "Check-the-Box" ruling by the US IRS. This allows the entity to be treated as a "pass-through" partnership for US tax purposes, enabling the US parent to consolidate the Mexican entity’s losses or profits directly, often simplifying the use of foreign tax credits.
• Governance: The governance structure is simpler, without the requirement for a Statutory Examiner.

Step 2: Verify business name availability

You must obtain a Corporate Name Authorization (Autorización de Uso de Denominación) through the Ministry of Economy. This ensures your proposed name does not conflict with existing entities. The service is free.

Step 3: Prepare incorporation documents

This phase is often the biggest bottleneck. Documents from the parent company must be notarized and Apostilled in the country of origin to be valid in Mexico.

• Articles of Incorporation (Parent Co): Proof of existence.
• Power of Attorney (POA): Authorizing a local representative to sign the deed.
• Certified Translations: All foreign documents must be translated by a certified expert translator (Perito Traductor).
• ID of Legal Representative: Passport or official ID.

Step 4: Register with Notary and Public Registry

The legal representative signs the Acta Constitutiva (Incorporation Deed) before a Mexican Notary Public. The Notary then records this deed with the Public Registry of Commerce (RPC).

• Authority: Registro Público de Comercio
• Outcome: The company now has legal standing against third parties.

Step 5: Register for tax and social security

This is the most critical operational step.

• Tax ID (RFC): The legal representative must physically appear at the Tax Administration Service (SAT) to capture biometric data (iris scan, fingerprints) to obtain the e.firma (electronic signature). Appointments are scarce.
• Foreign Investment Registry (RNIE): File within 40 business days of incorporation at the RNIE Portal.
• Social Security (IMSS): Register as an employer to hire staff compliantly.

Step 6: Open a corporate bank account

Once the Tax ID (RFC) and electronic signature (e.firma) are securely obtained, you can begin the process of opening a corporate bank account, typically with major institutions like BBVA, Banorte, or Santander. Banks have stringent Know Your Customer (KYC) requirements. You will need the certified Acta Constitutiva (incorporation deed), the official RFC documentation, verifiable proof of the company's fiscal address, and a detailed "Beneficial Owner" (Controlador Beneficiario) declaration. Expect a lead time of 4 to 8 weeks due to centralized compliance checks and the requirement for physical signatures.

Step 7: Set up payroll and employment compliance

Compliance with Mexico's Federal Labor Law (Ley Federal del Trabajo) is essential and highly protective of the employee. This requires specific registrations before you can legally hire.

• REPSE (Registry of Specialized Services Providers): This is vital due to the 2021 outsourcing ban. If your company uses external providers for non-core, specialized services (e.g., security, maintenance, or specific niche consulting), those providers must be registered with the REPSE.
• Profit Sharing (PTU): Mexican law mandates that all entities with employees must distribute 10% of their annual pre-tax profits to the workforce.
• Benefits (IMSS and INFONAVIT): All employees must be registered with the Mexican Social Security Institute (IMSS). Employer contributions to IMSS (covering health, pension, and disability) and INFONAVIT (National Housing Fund) typically add 25% to 35% to the gross salary cost.

Post-registration obligations

After incorporation, companies in Mexico must stay compliant with local governance, tax, and employment laws. Typical requirements include:

• Tax and financial reporting: File provisional monthly income tax payments and the Annual Tax Return (by March 31st) with the SAT.
• Corporate registers: Maintain the "Beneficial Owner" (Controlador Beneficiario) file, identifying individuals who own >15% of the entity.
• Compliance tracking: Monitor deadlines for the Annual Economic Report to the RNIE (required if assets exceed approx. $110M MXN).
• Licenses and renewals: Renew municipal commercial licenses and Civil Protection permits annually.
• Recordkeeping: Retain accounting and legal records for a minimum of 5 years (10 years recommended) in accordance with the Federal Fiscal Code.
• Employment law compliance: Adhere to the ban on outsourcing core business activities. Ensure specialized service providers are REPSE registered to maintain tax deductibility.

Taxes and financial considerations

When operating a Mexican entity, you must navigate a highly digitalized tax environment where compliance is tracked in real-time.

• Corporate Income Tax (ISR): Mexico levies a flat 30% federal tax on net taxable profit. Unlike some jurisdictions where you pay at year-end, Mexico requires monthly provisional payments (pagos provisionales) due by the 17th of each month. These are calculated using a "profit coefficient" based on your previous year's margins. New entities are exempt from these monthly payments during their first year of operations. The final Annual Tax Return must be filed by March 31st of the following year.
• Value Added Tax (VAT / IVA): The standard VAT rate is 16% on goods, services, and imports. A reduced rate of 8% applies to businesses in the northern border region (near the US) to maintain competitiveness, while a 0% rate applies to exports. You must calculate, collect, and remit the net VAT (collected minus paid) by the 17th of every month.
• Payroll and social contributions: The employer's tax burden in Mexico is significant, typically adding 25% to 35% to the gross salary cost. This includes contributions to Social Security (IMSS), the National Housing Fund (INFONAVIT), and retirement savings. Additionally, states levy a local Payroll Tax (ISN) ranging from 1% to 3% (e.g., 3% in Mexico City) on total remuneration. Employers are also responsible for withholding the employee's income tax (1.92% to 35%) and must account for the mandatory Profit Sharing (PTU), which requires distributing 10% of the company's annual pre-tax profits to eligible employees.
• Accounting standards: Private companies generally prepare financial statements using Mexican Financial Reporting Standards (NIF), which are largely aligned with IFRS. A critical distinction in Mexico is the requirement for "Electronic Accounting" (Contabilidad Electrónica). You must upload your accounting balances to the tax authority's portal on a monthly basis.

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Expand internationally with Deel

Whether you’re hiring through an EOR or establishing your own local entity, Deel’s all-in-one platform gives you everything you need to expand into Mexico—quickly, compliantly, and with confidence. From market entry to ongoing operations, Deel helps you hire, onboard, and manage teams seamlessly from day one.

With Deel, you can:

• Test new regions using Deel’s local entities through our Employer of Record service—hire employees compliantly, delegate payroll and taxes, and access localized employment contracts.
• Open entities with Deel Entity Setup, where our team manages everything—from incorporation and tax registration to coordination with local experts.
• Centralize your compliance and records with Deel Entity Management, including automated filings, calendar reminders, and visibility across all entities.
• Integrate with Deel Payroll and Deel HR for compliant payments, benefits, and workforce oversight—all in one platform.

For companies transitioning from the EOR model to owned entities, Deel ensures a smooth handover and consistent compliance every step of the way. Enter new markets, onboard talent, and manage your global workforce—all through one unified platform.

FAQs

How long does it take to open an entity in Mexico? Approximately 3 to 5 months, largely due to document legalization abroad and appointment scarcity at the SAT. Find out how long setup takes with our Entity Setup Calculator.

What is the minimum capital required? There is no legal minimum for an S.A. or S. de R.L., but $10,000 MXN (approx. $500 USD) is standard practice.

Can foreign companies own 100% of an entity in Mexico? Yes, for most sectors. The bylaws must include the "Calvo Clause," where foreign shareholders agree to be treated as nationals regarding their investment.

Do I need a local director or representative? You do not need a resident director for governance, but you must have a Legal Representative with a valid Mexican Tax ID (RFC) to handle tax matters with the SAT.

How much does it cost to register an entity? Between $3,500 and $8,000 USD ($70k - $160k MXN), covering notary fees, registry rights, translations, and legal counsel. Find out the setup cost with our Entity Setup Calculator.

Can I hire employees before the entity is fully registered? Typically, no. You need an RFC and employer registration to hire directly. However, Deel’s Employer of Record (EOR) lets you hire and pay talent immediately while your entity setup is in progress.

Can Deel help me open an entity in Mexico? Yes. Deel Entity Setup manages the end-to-end process — from registration to payroll compliance—in over 100 countries. Deel’s local experts handle documentation, filings, and legal requirements on your behalf.

Does Deel offer ongoing compliance and payroll support?

Yes. Deel offers both managed services and self-service tools to help you stay compliant.

If you’re using Deel Entity Management, Maintenance, EOR, or Payroll, our team handles payroll, benefits, filings, and compliance obligations on your behalf.

For teams managing their own entities, Deel Compliance Hub makes staying compliant simple by providing real-time regulatory updates, risk alerts, and workforce insights across 150+ countries. Proactively manage compliance with our Compliance Monitor, Workforce Insights, and an AI-powered Worker Classifier, staying ahead of changing employment laws.