Tabla de contenidos
- What is a commercial company?
- What types of commercial companies exist?
- Advantages of establishing a business corporation in Mexico
- Procedures and tax payments to be completed as a commercial company
If you are about to start your own business, you are probably wondering how you want to set up your business: whether it is better for you to act independently, as a natural person with business activity; or whether it is better to establish yourself as a legal entity through the creation of a commercial company.
To help you make this decision, in this article we will address the most important points to consider and the advantages of establishing commercial companies, as well as the procedures and payments that you will have to cover if you choose this option.
What is a commercial company?
Business corporations are legal entities that represent one or more individuals or legal entities involved in the creation, administration and operation of a commercial organization; and are governed by a social contract to obtain economic profits from their activities.
It is common to think that a company must be made up of two or more individuals, but these legal entities can only be made up of one person, whether physical or moral. When incorporated as such, commercial companies acquire a figure independent of the group of partners that make it up, and therefore have their own name and assets, as well as rights and obligations.
What types of commercial companies exist?
In Mexico, the General Law of Commercial Companies recognizes 7 types of commercial companies:
Collective Name Company (SNC):
Exists under a single corporate name and the partners are equally responsible for the corporate obligations. For example: Banco Nacional de Comercio Exterior, SNC, Mexican financial institution.
Simple Limited Partnership (S. en CS):
Exists under a corporate name, in which the partners are equally responsible for the social obligations, but allows the incorporation of limited partners (who only contribute resources).
Limited Liability Company (S. de RL):
Formed by partners who are only obliged to pay their contributions. For example: Strategic Services in Information Technology S. de RL de CV, dedicated to technological and digital planning.
Sociedad Anónima (SA):
Formed by shareholders who are only obliged to pay for their shares. For example: Bimbo SA de CV, one of the largest Mexican food companies.
Limited Partnership by Shares (SCA):
Composed of general partners and limited partners. For example: Bader Jalisco, S. en C. por A. de CV, an important leather manufacturer.
Cooperative Society (SC):
Made up of individuals with common collaborative objectives. For example: Administrative Corporation of Companies, SC, dedicated to the commercialization of LP gas.
Simplified Joint Stock Company (SAS):
Formed by one or more natural persons who are only obliged to pay their contributions.
The first six types of companies we have listed must be established before a notary public, by presenting a deed or policy in which the statutes of the business company are stated. Once this procedure has been completed, it can operate as a company and the partners will begin to receive their profits according to the shares or contributions they have made for its formation.
On the contrary, Simplified Joint Stock Companies are distinguished by being made up of a single natural person and can be established through the electronic system of the Ministry of Economy .
Advantages of establishing a business corporation in Mexico
Each type of company has different characteristics and implies different obligations and rights for the partners. However, they share some common economic, financial and tax advantages. Some of them are:
- The private assets of the partners do not form part of the company’s assets, so in the event of debt, their assets or capital are not compromised.
- It allows the creation of companies with greater resources, thanks to the contribution of more than one partner.
- They can be created with resources coming entirely from foreign capital.
- Some types of business corporations do not require a large investment to form.
- There is great freedom in the stipulation of collective agreements and statutes.
- Some companies allow partners with administrative voting rights, while others only have the capacity to contribute financially.
- In the event of dissolution, the assets are distributed among the partners and shareholders; they are not lost.
Procedures and tax payments to be completed as a commercial company
Once the business has been authorized, it is necessary to register with the Federal Registry of Taxpayers. This step is essential to begin your operations, since otherwise you will not be able to comply with your tax obligations.
To start carrying out commercial operations, you must also process the Digital Seal Certificate, which will enable you to generate a Digital Tax Certificate online (CFDI) .
The payment of Income Tax (ISR) and Value Added Tax (VAT) is mandatory for all commercial companies, except in their first year of operations. Likewise, the company must comply with the payment of fees and taxes derived from its role as an employer, such as the withholding of ISR from its workers, the payment of registration to the Mexican Social Security Institute (IMSS) and the Payroll Tax (ISN) .
In addition, all companies (except SAS) are required to create a reserve fund with 5% of annual net profits.
Choose the best type of corporation for your business. This will help you delegate responsibilities, understand your obligations, and estimate the profits you and your partners can make. Some options will allow you to start with modest resources. While others will allow you to partner with a large number of partners and invest a lot of capital.
