A new business entity for corporations in Mexico
Beginning September 15, 2016, a new business entity for corporations will be available in Mexico. According to the Official Federal Gazette, an entity called Sociedad por Acciones Simplificada — (SAS) Simplified Stock Corporation.
This new amendment to the corporation law was created in an effort to stimulate small business and encourage entrepreneurship in Mexico. The new system promises to be an effortless and quick way to get started in business, but is it the right corporation entity for you?
The Promise of Doing Business Under SAS
- No longer require a minimum of 2 partners to form a company, a single business owner may incorporate their business.
- No minimum investment
- SAS corporation can be set up and incorporated in one day at no cost.
- The streamlined process is done electronically through The Public Registry of Commerce, rather than in front of a Notary or attorney.
- The annual financial report may be submitted online.
- Tax Administration Service SAT to provide a simplified account system
- SAS are exempt from forming a legal reserve fund.
The Reality of Doing Business Under SAS
- The owner of an SAS business must be legal, a national or hold a residence visa and apply for a FIEL; The Advanced Electronic Signature Certificate generic tax ID.
- SAS shareholders cannot hold shares in other companies unless they are the administrator.
- Complete lack of legal advice and guidance during the creation of the corporation.
- No legal advice during the creation of its charter and bylaws.
- SAS claims to complete in one day, yet it takes at least two days for a FIEL and a few days to select and register a company name.
- Without legal guidance, shareholders may not be educated in proper business and labor protocol.
- SAS caps the company income to five million pesos, if you surpass that income, you are obligated to change the entity to a traditional corporation, costing you time and money.
- If illegal activities are found in an SAS company, the shareholders will be held solely responsible.
- You must electronically report everything the company does, including contracts and finances to the Ministry of Economy. Failing to report may result in cancellation of the SAS status.
- Banks and other entities may question the validity of an SAS corporation.
Consult an experienced business attorney in Mexico to determine which corporation entity is best suited for your business.