The Mexico subsidiary setup process is the key to developing and growing your company abroad. Setting up a Mexico subsidiary requires a significant amount of time, money, emails, and travel to and from Mexico, but the process is essential before you hire and start business operations.
How to Set up a Mexico Subsidiary
A subsidiary allows you to operate as a branch of a parent company while meeting the needs of local customers in Mexico. It is known as an S.A. de R.L. (Anonymous Society of Limited Responsibility) or S.A. de C.V. (Anonymous Society of Variable Capital) in Mexico and runs similarly to an LLC in the US. The subsidiary gets limited independence from the parent company, and the parent company stays liable for anything that goes wrong.
The Mexico subsidiary setup process begins by choosing a corporate name and registering with the Ministry of External Affairs (SRE). If there are no duplicates, your name should get approved. You’ll then enter into a proforma agreement where any non-Mexican shareholder is bound by Mexican laws.
Hire a local attorney that can prepare documents for you, such as corporate governance, duration of existence, and more. They can explain many employment, compensation, and benefit laws in Mexico. You should get every document notarized and establish a power of attorney for your subsidiary.
Mexico Subsidiary Laws
As soon as you establish a subsidiary, you must comply with all Mexico subsidiary laws — including zoning, environmental regulations, health and sanitary issues, and immigration.
Taxes are one of the most significant aspects of Mexico’s subsidiary law. Typically, the home company in the US will receive a tax credit for any income, dividends, and withholding taxes paid to the Mexican government. However, it is important to stay compliant with all tax laws in Mexico to avoid costly fines. You must enroll as an employer with Mexican Social Security and register for taxes.
Subsidiaries in Mexico are required to pay employees through an in-country bank account in pesos. You’ll also pay social security and other taxation agencies this way.
Benefits of Mexico Subsidiary Setup
Expanding your company to Mexico is something to celebrate, and subsidiaries in the country enjoy many benefits. For example, setting up a subsidiary allows you to grow your company while avoiding liability in Mexico.
The parent company in the US will have control over the Mexico subsidiary. That means any litigation, fines, or compliance issues will fall on the parent company as the Employer of Record. Your Mexico branch will decrease its liability while still operating as a part of the overall company.
You’ll also determine your subsidiary’s level of independence. Because Mexico does not do business the same way that the US does, you can tailor the subsidiary to the country’s laws and cultural customs while still retaining elements of the US company.
Mexico Subsidiary Outsourcing
Setting up a subsidiary in Mexico requires a significant amount of time, money, emails, and travel. The entire process will take months from start to finish and could delay operations. You also cannot hire until you set up a subsidiary, potentially leading you to lose talent who will begin to look for jobs elsewhere.
Instead of setting up a subsidiary, you can work with a global PEO such as Globalization Partners. We specialize in Mexico subsidiary outsourcing, helping you get your branch location off the ground before you establish a subsidiary. We can hire employees on your behalf and act as the Employer of Record, so you are not liable for any compliance issues or fines.
Globalization Partners will even help you through the Mexico subsidiary setup process. We help you run your business while you finish the months-long process, or you can decide to work with us indefinitely to take the liability off your shoulders and onto ours. Contact us today to learn more.