Forms of business setup in Mexico
Most people meet this decision having already been told the answer by someone who benefits from a particular one.
This page does not do that. It sets out what each form is and what differs between them, so that when you do take advice you can tell whether it fits your situation.
Persona física con actividad empresarial
Not every business in Mexico is a company.
Persona física con actividad empresarial is an individual registered to carry out business activity. The person trades in their own name, invoices, and holds the licences their activity requires. No company exists.
It is not only for Mexicans. If you hold an RFC and a resident permit, this route is open to you as a foreigner, and either type of permit is accepted. Temporary residency is enough.
In practice the resident permit is rarely what stops people. Getting the RFC is.
What an RFC and an e.firma are, and what you need for each
What setting one up involves
No notary. There is no incorporation and no notarial deed. Two things happen instead:
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You inform SAT of your activities and your tax regime
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You obtain the business licence your activity requires, which in Puerto Vallarta means UMA
That is the whole of it. Because it is a natural person rather than a company, it is one individual, not several.
Liability
There is no separation between you and the business. The individual and the business are the same legal person.
In practice most professionals carry liability insurance for exactly this reason. Worth noting that forming a company later does not replace it: Satisana Medicine carried liability insurance as a persona física and still carries it now as a company.
How common it is
This is the ordinary form for a one-person operation, and it is not a lesser one.
Most professionals in Mexico are registered this way. Doctors, dentists, lawyers. So are coffee shops and the large majority of small businesses you walk past.
S. de R.L.
Sociedad de Responsabilidad Limitada. A limited liability company under Mexican corporate law, and the form most of my setup clients end up with.
It needs at least two partners, and can have up to fifty. A single person cannot form one alone, which is a large part of why so many one-person businesses are persona física.
Each partner's financial liability is strictly limited to what they put in.
Ownership is divided into partes sociales, equity parts rather than stock. They are not freely negotiable, which is the point rather than a limitation.
What it is built for: closely held businesses, joint ventures, and foreign corporate subsidiaries. Situations where the partners are the owners and intend to stay the owners, and where control matters more than the ability to bring in outside investment.
A statutory auditor, a comisario, is optional.
S.A. de C.V.
Sociedad Anónima de Capital Variable. A stock corporation with variable capital.
At least two shareholders, with no upper limit.
Ownership is divided into acciones, shares, and those shares are freely transferable. Personal liability is capped at the value of the shares a shareholder has subscribed.
The "de C.V." part means the company's capital can expand or contract by internal corporate resolution, without going back to a notary to formally modify the incorporation deed each time.
What it is built for: scalable enterprises, businesses taking on outside investors, and companies expecting to grow through multiple rounds of capital.
A statutory auditor is mandatory, not optional.
If you are a US taxpayer, one thing to raise with your accountant
The two company forms are treated differently under US tax rules, and the difference is not small.
An S. de R.L. is eligible for check-the-box treatment, meaning it can be treated as a transparent, pass-through entity. An S.A. de C.V. is a per se corporation and is taxed as an opaque one.
I am not a US tax adviser and this is not advice. It is a question worth putting to whoever handles your US filings before you form anything, because it is far easier to choose correctly at the start than to restructure afterwards.
What actually differs between them
A note on my own incentives
Setting up as a persona física costs 50,000 MXN. An S.A. de C.V. can cost 120,000.
My fee is the same at both ends.
Everything between those two numbers is notary and government fees, which I pass through at cost and do not mark up. An S.A. de C.V. costs more because customising share classes, board structures and transfer restrictions takes more notary and legal hours, none of which are mine.
So I have no financial reason to steer you toward one or the other, and you should be careful with anyone who does.
What catches people about forming a company
Every partner has to come to Mexico. At some point each of them has to attend the notary in person. People plan a formation from abroad, assume one of them can handle it, and discover that the whole ownership group has to be in the country.
That is the part that reorganises travel plans and timelines, and it is worth knowing before you agree dates with anyone.
Being represented rather than attending
The exception is for shareholders rather than partners. Someone holding shares without being active in the business can be represented by a power of attorney executed abroad and apostilled, and a shareholder can be a company rather than a person. I have done this for a Mexican branch of a foreign company, and for a passive investor in a startup. It works, it takes longer, and the cost depends entirely on the structure.
This is the clearest example I have of why the call exists.
Written out as rules it looks like something you could check yourself against a list. In practice which route is open to you depends on who is involved, what each of them will actually be doing, and where the money is coming from. It is very easy to be promised something here that turns out not to be available to you.
One thing worth raising in the first conversation rather than the fifth: financing is disclosed during the process. Some people do not expect that, and occasionally it is the thing that decides whether a structure is viable at all.
Registering the foreign investment
Where the owners are foreign, registration with the Dirección General de Inversión Extranjera is part of the process. At Satisana Medicine, where both owners are foreigners with residency, my notary handled it as part of the conversion to a company.
But not every partner needs a resident permit. This is where people expect the process to be harder than it is. Residency is required for an individual registering as a persona física. It is not required of every partner in a company.
The company obtains its own RFC and e.firma, and an appointed legal representative can file on the company's behalf from then on.
So the two routes ask for different things. Persona física needs your residency and your own RFC. A company needs everybody in the room at the notary once, and residency for fewer of you than you probably expect.
There is a second, rarer trap: establishing a structure and then finding the licence your activity requires is not available to it. It happens, and it is expensive when it does, but the travel problem above is the one that catches most people.
It is not a permanent decision
Satisana Medicine's first licence was as a persona física. It later became an S. de R.L. Over that period sales went from 440,100 MXN to 2.6 million MXN.
The reason is more useful than the fact.
The business is run by two brothers, but the original registration was in one brother's name alone. A persona física is a single individual, so in legal terms the second brother had no position in the business at all. For tax reasons, and because of where liability would fall, I advised forming a company. They now hold fifty per cent each, and the company rather than either brother carries the liability.
That is the ordinary shape of this decision. Something changes, usually a second owner, a different tax position, or a liability you no longer want attached to a person, and the structure follows.
Starting as one form and converting later is a normal path, not a correction of an earlier mistake.
Where this sits in everything else
Whichever form applies, the licensing that follows is the same problem: what your activity requires at municipal, state and national level, and whether your premises can carry it.
What a business licence in Puerto Vallarta requires
Uso de suelo, and why it decides everything
Which one applies to you
I am not going to answer that on a web page. It depends on what the business will do, who owns it, and which licences your activity requires, and I would rather ask than guess.