Legal implications of doing business in Mexico Back to blog

Legal implications of doing business in Mexico

August 2, 2023

Doing business in Mexico may be just what your company needs to prosper, with lower wages for skilled workers and lower transportation costs since Mexico is situated closer to the US and Canada, than, China or India for example. Location also ensures faster production turnaround time, not to mention ease of communication, and similar time zones.

Since, Mexico is a part of the USMCA (formerly known as "NAFTA"), between Mexico, Canada and the United States there are many benefits to doing business in Mexico. USMCA eliminates tariffs between the countries and has built in agreements and legal processes, with international rights for business investors.

Foreigners can own 100% of a Mexican corporation and open their business in Mexico. Mexico’s legal system and tax laws for businesses do not discriminate between foreigner business or Mexican National owned businesses.

Owning a business in Mexico can be a lucrative initiative, but make sure you have a Mexican Law Firm to represent you and your company, they will help you setup your business in Mexico, a specialist like can provide important guidance through, creating a corporation, advising you on Mexican labor law, Mexico tax laws, and all red tape that goes along with doing business in Mexico.

Anyone who has begun the process of opening a business in Mexico can not stress enough the importance of using a lawyer, you will need to deal with all business aspects, zoning and building permits, taxes, environmental regulations, and even your own immigration status.

Business entity options are similar to the rest of North American including, Public Limited Company or Corporation (Sociedad Anonima (S.A.) which either have fixed or variable capital. This entity will have at least 2 board members and an unlimited amount of shareholders. This type of company is required to have an accounting firm that will ensure the proper management and legal aspects are taken care of.

Limited Liability Company (Sociedad de Responsabilidad Limitadada ( R.L.) either fixed or variable capital. This entity must have at least 2 partners, but no more than 50. It is not required to have an accountant.

Sole Trader (Persona Física con actividad empresarial) An individual with a business using their own name for the business and tax purposes. You are only one shareholder and solely liable.

Professional Service (Sociedad Civil (S.C.) consultants, translators, lawyers or accountants type of business. No minimum capital is required.

NonProfit (Asociacion Civil (A.C.) charities and organizations

The most common being corporations and limited liability companies, a professional legal team can help you assess which option is best for your business and which will give you the most operational benefits.

Mexico’s Labor Law

It is important to familiarize yourself with Mexico’s labour laws. Foreigners doing business in Mexico need to be cautious of their hiring practices and the labour laws of Mexico. Mexico has strict labour laws in place to protect the employees, but a Mexican law firm can help you make sense of the labor laws of Mexico.

As an employer, it is in your best interest to have boots on the ground through a specialist, such as, to learn your rights as an employer, to develop employee contracts (which is your best defense if you end up in litigation with an employee) and learn your best practices for hiring and dismissing staff. You will receive advice on what is legally expected from you as an employer to ensure you have happy, productive staff and avoid having issues with the labor board.

All conditions and expectations must be documented in an employment contract between the worker and the employer. Any disagreement between the two will result in the employer being required to prove his case against the employee.

Labor laws can change with each state and update without notice.

As in Canada and the US, there are many labor laws involving, child labor, discrimination, harassment, maternity leave, profit sharing, overtime, yearly wage negotiation, vacation days, and union regulations if applicable. Depending on the business you open, you may be required to pay corporate tax, tax on dividends, asset tax, value added tax, and payroll taxes. MexLaw can provide accounting services for your business to help you get the most from your investment.

Good To Know


Related articules