How to Register a Sole Proprietorship (Persona Física con Actividad Empresarial) in Mexico

In Mexico, operating as a Persona Física con Actividad Empresarial offers a flexible and cost-effective way to formalize your freelance or small business activity. You can use your personal identity to operate, invoice, and pay taxes, making it ideal for professionals, artisans, and independent contractors.

The process is relatively simple and can be done largely online through the Servicio de Administración Tributaria (SAT). Still, you’ll need to choose the right tax regime, secure your e-signature, and comply with invoicing and recordkeeping rules.

The main challenges include navigating tax filings and understanding required documentation. But the benefits of no start-up capital, straightforward registration, and legal acceptance make this a great option for solo entrepreneurs.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in Mexico?

In Mexico, the equivalent of a sole proprietorship is known as a Persona Física con Actividad Empresarial, an individual taxpayer conducting business activities who is fully liable for operations under their personal identity. It’s a popular choice for self-employed professionals and small-scale entrepreneurs.

How does a sole proprietorship work in Mexico?

Persona física vs other business structures in Mexico

Step-by-step guide: How to register as a persona física in Mexico

Step 1: Check eligibility

You must be 16 years old or older, have a valid CURP with the National Population Registry, have a proof of address, and official ID. Foreign nationals must also bring a valid visa or naturalization letter.

Step 2: Gather required documents

You’ll need:

• Printed copy of your pre-registration folio
• Valid ID (e.g., passport, voter ID)
• Proof of address (e.g., recent utility bill)
• CURP and e-signature (e.firma) files
• Valid visa, work permit, or naturalization letter (for foreign nationals moving to Mexico)
• USB drive to save your electronic signature (e.firma)

Step 3: Start registration online with SAT

Initiate registration online via the SAT portal by completing the form. You will need to provide basic personal information and a proposed tax regime.

Step 4: Finalize registration and obtain your e.firma

After completing the registration online, you must schedule an in-person appointment at a local SAT office to finalize your registration. You’ll need to bring the key documents listed above in Step 2 to your appointment.

Step 5: Secure local licenses

Depending on location and trade, you may need municipal permits, such as a business license or land-use license for physical locations, from the local government.

Obtain any relevant local licenses through the official website of your municipality (e.g. the government of Mexico City, Guadalajara, etc.) or visit your local city hall.

Step 6: Post-registration obligations

Once you have your Registro Federal de Contribuyentes (RFC) and your e.firma, you are officially a Persona Física con Actividad Empresarial. Your next steps are to:

• Issue Digital Invoices (CFDI): You are legally required to issue a digital invoice (Comprobante Fiscal Digital por Internet - CFDI) for every service or sale. The SAT provides a free invoicing tool on its website.
• File Monthly Tax Returns: You must file monthly provisional tax returns for both income tax and VAT (if applicable).
• Open a Business Bank Account: While not legally required, it's highly recommended to open a separate business bank account for all business transactions to simplify your accounting and tax compliance.

Financial and tax obligations for sole proprietors in Mexico

Income Tax (ISR): As a Persona Física con Actividad Empresarial, you pay personal income tax on your business profits. Mexico also offers Régimen Simplificado de Confianza (RESICO), a simplified regime for individuals earning under MXN 3.5 million annually, potentially reducing the tax burden.

Value-Added Tax (IVA): If applicable to your services or products, you must collect and remit VAT. Requirements depend on your activity and total turnover. The standard VAT rate is 16%, but a reduced rate of 8% applies to some border regions with the US.

Social Security (IMSS) Contributions: Social security contributions are optional if you do not have employees. However, if you hire staff, you must register as an employer with the Mexican Social Security Institute (IMSS) and contribute social security taxes. Contributions are based on your income level.

Recordkeeping: If you have chosen the standard tax regime, you must keep detailed records of your invoices and accounting to support your tax filing.

If you have chosen the RESICO tax regime, recordkeeping requirements are simplified since your taxes are paid on gross income. You are still required to keep records of invoices and simple records of income, but you are not required to track expenses for the purpose of calculating income tax.

Overall, you are required to retain records for five years from the transaction date.

Launch your contracting career and stay compliant with Deel

Registering as a Persona Física con Actividad Empresarial gives you independence, but it also means handling taxes, invoices, and records on your own. Deel’s all-in-one platform helps you manage obligations without the stress. With Deel, you can:

• Automate invoicing and expense tracking with essential bookkeeping tools
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