When an entrepreneur or investor is interested in operating in Mexico, it is essential to know which type of business society is best to create depending on the business or the needs of the partners. Learn about the business societies in Mexico.
The General Law of Mercantile Societies in Mexico recognizes a business society as a legal entity independent of the persons that form it, although it is true that in some types of partnerships the members are required to use personal capital.
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What is a Business Society?
A business society is accomplished when a group of individuals or legal entities decides to set out as a corporation to realize economic activities that provide a benefit to the members or collaborators of the society.
To create a business society, it is necessary to generate an Incorporation Act that contains the basic and general information of the society to be created.
Finally, it must be registered before the Public Registry of Commerce under a corporate name, which will help to identify the company unequivocally.
What is an “Incorporation Act”?
To incorporate a company in Mexico (except S.A.S.) you must go to a notary or public broker who is in charge of issuing and validating the Incorporation Act.
The items that must be filled out in the Incorporation Act may vary according to the company, but some of the items that must be included are;
- Names, nationalities, and addresses of the persons that constitute the company.
- The reason for the company
- Denomination or name of the company.
- Duration can be indefinite
- The amount of the capital stock.
- The form in which the corporation will be administered and the powers of the administrators.
- The distribution of profits and losses among the partners.
The Notary or public broker may annul the process if the provisions of the minutes contravene the provisions of The General Law of Mercantile Societies.
Types of Business Societies
There are 7 different types of business societies in Mexico, these societies are governed by The General Law of Mercantile Societies. Each type of company serves different needs.
- Partnership in Collective Name (S. N. C.)
- Limited Partnership (S. en C. S.)
- Limited Liability Company (S. de R. L.)
- Stock Corporation (S. A.)
- Limited Joint-Stock Company (S. C. A.)
- Cooperative Society (S. C.)
- Simplified Joint-Stock Company (S. A. S.)
When a company is constituted, rights and obligations are acquired that will depend on the liability obtained, this is the importance of knowing the characteristics and obligations that each one represents.
We often work with HG Abogados to discuss the best Business Society in Mexico for our international clients. Take a look at their website and contact us to arrange a formal introduction.
Characteristics of Business Societies in Mexico
– Partnership in Collective Name (S. N. C.)
The General Law of Mercantile Corporations defines it as the one that exists under a corporate name and in which all the partners respond, in a subsidiary, unlimited and joint and in several manners the corporate obligations.
For example, if the company runs out of capital and has payment obligations, the partners must resort to the private capital of the partners that comprise it, since they are all obligated to respond jointly and severally.
– Limited Partnership (S. en C. S.)
It is similar to the Partnership in Collective Name, with the difference that the Limited Partnership is composed of one or several commands who respond in a subsidiary, unlimited, cooperative, and several manners, to the social obligations of one or several Limited Partners who are only obliged to pay their contributions.
– Limited Liability Company (S. de R. L.)
The Limited Liability Company is commonly seen in small and medium-sized companies, this company is composed of two or more partners, it exists under one name or corporate name, and the obligation of the partners is limited to the capital contributions made by each member. The contributions of the partners together form the capital stock.
– Stock Corporation (S. A.)
A corporation may be formed by at least two persons who are obligated only to pay for their shares.
Investors can participate in a corporation by obtaining different titles or shares issued by the entity, having different types of shares and consequently different benefits or rights.
This is one of the most common types of corporations in Mexico and the world.
– Limited Joint-Stock Company (S. C. A.)
The S.C.A., as the Limited Partnership, is composed of limited partners, who respond in a subsidiary, joint, and unlimited manner to the obligations of the company with third parties, and the limited partners who are only obliged to pay for their shares without intervening in the decisions of the company.
In this case, the capital stock of the company is converted into shares and cannot be transferred without the full agreement of the partners.
– Cooperative Society (S. C.)
The Cooperative Society is governed under its law, the General Law of Cooperative Societies. Different people or companies with principles of solidarity, support, equality among members, honesty, and transparency, integrate into this society.
Cooperative members join the purpose of achieving personal and group objectives through commercial activities. The General Law of Cooperative Societies stipulates that companies under this regime must promote cooperation, ecology, and a solidarity economy.
– Simplified Joint-Stock Company (S. A. S.)
The Simplified Joint Stock Company has the proposal for the creation of micro and small companies with an annual turnover of fewer than five million pesos and has the facility of incorporating the company by digital means without the need for a notary or public broker.
It can be incorporated with one or more persons, who are only obliged to pay their contributions represented in shares.
Each business society has characteristics that can be adapted to the needs of the shareholders, we hope this information is very useful in case you are looking to create a company in Mexico, do not hesitate to contact us.