Incorporation of commercial companies: A basic guide.

Closing the incorpration of a commercial company

Incorporating a business is an essential process for formalizing your business in Mexico and accessing a wide range of opportunities. However, navigating the legal and administrative requirements can be complex.

In this guide, we offer you a clear and concise overview of the fundamental aspects so that you can successfully start your business project.

What is a commercial company? A commercial company is a legal entity formed by two or more individuals or legal entities. The purpose of the company is to carry out economic activities within the framework of commercial law.

Its formation is carried out through a formal process, in which it is granted legal personality. This allows it to have rights and obligations independent of those of the partners or shareholders, as established by the General Law of Commercial Companies (LGSM).

In Mexico, commercial transactions are governed by the provisions of the Commercial Code and other applicable commercial laws. Additionally, depending on the specific case, the provisions of common law established in the applicable federal Civil Code may also apply to commercial transactions.

Advantages of forming a business entity: The advantages of forming a business entity are the following:

• Legal protection: Establishing a business entity guarantees a clear separation between personal and business assets, reducing risks and protecting partners in the event of company liquidation or other legal contingencies. Partners are only liable for the investments they have committed to making in the company.

  
  

• Suitable structure for receiving financing or investment: commercial companies have a structure that facilitates obtaining credits, loans and encourages investments, which boosts business growth.

  
  

• Building trust in your company: compliance with commercial law guidelines and the formality of incorporation, through articles of incorporation and other legal requirements, provides credibility and security, strengthening your company's image with clients, partners, and suppliers.

  
  

• Selling the business: A corporation allows for an orderly transfer or sale of the business, thanks to the clarity of its legal framework. This will allow you to assure potential buyers that your business is properly structured and ready to be sold.

What are the types of business entities?

In Mexico, the General Law of Commercial Companies recognizes various types of companies, each with specific characteristics and requirements. The choice of company type will depend on your business needs and objectives. Below are the traditional types of commercial companies:

• Public Limited Company (SA):

It is the most common form of business entity in Mexico, ideal for all types of companies. Capital is divided into shares, and the liability of the shareholders is limited to the payment of their shares.

This type of company provides corporate protection to its shareholders against the risks assumed by the company.

• Public Limited Investment Promotion Company (SAPI)

It is a variant of the public limited company (SA): it grants greater freedom to its shareholders by incorporating flexible mechanisms to encourage investment and improve corporate governance, thus facilitating the entry of new investors. This type of company requires a board of directors.

• Limited Liability Company (S. de RL)

This company also provides protection to its members against the risks assumed by the company. The liability of the members is limited to the amount of their share capital.

This combines limited liability with a simpler operational structure. It is recommended for a small group of partners, such as family businesses or companies controlled by a holding company.

• Simplified Stock Company (SAS).

Designed to simplify incorporation procedures, it allows businesses to begin operations with fewer formal requirements. It's even possible to create a company with a single shareholder. However, it has some disadvantages, such as annual income limits, a prohibition on shareholders participating in other companies, and a lack of clarity in its regulations. We do not recommend its use.

• General Partnership (SNC)

In this model, the partners have unlimited and joint liability for the company's obligations, which implies a personal commitment in commercial transactions.

However, this type of company is practically obsolete in Mexico, so we do not recommend it.

• Limited Partnership:

Here, two types of partners are combined, allowing for diversification of the social capital participation: collective partners, who manage and assume unlimited responsibility, and limited partners, whose responsibility is limited to the amount of their contribution.

Like the General Partnership, this type of company is almost obsolete in Mexico and we do not recommend participating in it.

What is the procedure for setting up a business entity?

The formation of a commercial company involves a series of legal and administrative steps that must be followed to ensure its validity and proper functioning.

At BLP Advisors, we guide you through every stage of this process to ensure your company complies with all legal requirements.

The steps to follow to establish a commercial company are:

• Type of business entity: Evaluate the needs and characteristics of your business to select the appropriate model. Consider aspects such as share capital, number of partners, and their liability.

  
  

• To finalize the company name or business name: request authorization from the Ministry of Economy for the name to be used. This process may take a few days or weeks, depending on the ministry.

  
  

• Drafting the articles of association: determines the corporate purpose, the registered office of the company, the rights and obligations of the partners, the distribution of profits and the internal rules of operation of the company.

  
  

• Formalize the articles of incorporation: Go to a public notary or authorized official to have the articles of incorporation drawn up and certified. This document formalizes the creation of the company and gives it legal validity.

  
  

• Registering the business: Submit the articles of incorporation to the Public Registry of Commerce to grant it legal personality and allow it to operate legally. This process is carried out directly by the notary's office.

  
  

• Obtain the Federal Taxpayer Registry (RFC): obtain registration with the Tax Administration Service (SAT) to comply with tax obligations.

  
  

• Register your trademark: Obtain the exclusive right to use a company name or logo by registering your trademark with the Mexican Institute of Industrial Property (IMPI). This process takes approximately 6 months.

Benefits of choosing us: BLP

BLP is a firm specializing in legal services for companies and startups, founded in September 2020. Its partners have more than 8 years of experience in the field.

We work using an innovative approach: after understanding your company's needs, we prepare a fixed fee tailored to your requirements, allowing you to meet your legal needs.

Some of the areas we work in are:

• Corporate law

• Financial law

• Intellectual/Industrial Property

• Labor law

• Business legal advice

• Venture Capital

• Litigation

  
  

By choosing BLP Advisors, you will get:

• Experience and knowledge: we have a team of highly qualified professionals with extensive experience in the incorporation of commercial companies.

  
  

• Efficiency and speed: we focus on streamlining procedures and processes so you can start your business as soon as possible. • Security and trust: we give you the peace of mind of knowing that your company is correctly incorporated and meets all legal requirements.

  
  

• Save time and money: avoid errors and delays that can generate additional costs by relying on our services.

Trust BLP Advisors to incorporate your business, ensuring the integration of the essential elements of the articles of incorporation and taking the first step towards your business's success. For more information on contacting the company, click here.

FAQs

The formation of a commercial company can raise many questions.

Below, we answer some of the most frequently asked questions:

• Why does a company register in the Public Registry of Commerce?

Registration in the Public Registry of Commerce is essential to grant a company its own legal personality and ensure the publicity and transparency of its business activities. This fosters trust among investors, clients, and financial institutions.

• Does setting up a business entity have a cost?

Yes. This varies depending on the state and mainly includes notary fees and registration fees at the Public Registry of Commerce. The notary fee for incorporation is around $17,000 MXN + VAT.

• Can foreigners form Mexican companies?

Yes. Foreign individuals or legal entities may be partners in Mexican companies, unless the articles of association include a clause excluding foreigners.

Likewise, the Constitution and the Foreign Investment Law prohibit their participation in economic activities reserved exclusively for Mexicans or companies with an exclusion clause.

• Can a single person form a company?

The simplified joint-stock company is the only type of company in Mexico that can be formed by a single individual. However, as described above, we do not recommend its use.

BLP is here to guide you through the legal process for your business. Contact us to learn more about our services.