Corporate Law: Setting Up a Subsidiary in Mexico

Jun 27, 2025

Doing Business In Mexico

When expanding your business internationally, setting up a subsidiary in Mexico offers many advantages. The country offers a fertile ground for investment, with an attractive combination of skilled local talent and comparatively low labor costs, plus close proximity to the U.S. to facilitate close coordination between a subsidiary and a U.S.-based parent company. Besides enabling the recruitment of local talent, opening a local subsidiary can help decrease liability while still serving as part of the overall company.

However, before plunging into creating a Mexican subsidiary, companies should be prepared for the significant amount of time and resources the process can take. Further, a lack of local expertise can lead to procedural and operational mistakes that result in delays, fines, and other issues. Here’s a brief overview of what you should know.

Basic Facts on Establishing a Subsidiary in Mexico

Though there are several different types of commercial enterprises recognized in Mexico, most companies are commonly incorporated as a Sociedad de Responsabilidad Limitada (S. de R.L.) or a Sociedad Anónima de Capital Variable (S.A. de C.V.). Creating a subsidiary as a new corporate entity allows it to act as a branch of the foreign parent company while being adapted to local laws, customs, and customer needs. That subsidiary can have varying levels of independence, as determined by the parent company.

Setting up a subsidiary starts with selecting a corporate name and registering with the Ministry of External Affairs (SRE). This name must not duplicate that of a previously existing company, so it can be helpful to research availability and/or prepare and submit alternative names. After the name is approved, you must then enter into a pro forma agreement, by which any non-Mexico-based shareholder agrees to be bound by Mexican laws.

Articles of incorporation, bylaws, and transitory agreements must be notarized before a Notary Public. Then, once the Mexican subsidiary has been incorporated, its incorporation deed must be filed with the Public Registry of Commerce. The new entity will also need to be registered with various other governmental entities, including the Federal Taxpayers Registry and the National Registry of Foreign Investments. This latter is mandatory in cases where a subsidiary is being set up with foreign capital. You will also need to establish a power of attorney for your subsidiary. Additional permits may also be required, depending on the industry and location.

Hiring a local attorney is strongly advised to prepare the relevant documents, to complete the initial process of incorporation, and to provide ongoing guidance on legal compliance. As many Mexican employment, compensation, benefits, and other laws can vary from equivalent requirements in the U.S., having knowledgeable legal counsel is essential for effectively navigating the differences.

Subsidiary Laws in Mexico

Subsidiaries in Mexico are responsible for complying with all applicable laws, including immigration, zoning, environmental, health, and sanitation. Among the most significant legal requirements are tax laws; companies must stay compliant to avoid costly fines. Subsidiaries must enroll as an employer with the Mexican Social Security Institute and register for taxes. Typically, Mexican subsidiaries will receive a tax credit for any income, dividends, and withholding taxes paid to the Mexican government.

In addition, subsidiaries in Mexico must use an in-country bank to pay their employees as well as to pay social security and other taxation agencies. Such payments must be made in Mexican pesos.

Expert Legal Guidance for Subsidiaries in Mexico

If your company’s next contemplated move is opening a subsidiary in Mexico, MBL is your key to making the most of your opportunities. We can provide the guidance you need to select the right corporate entity for your needs, complete the legal steps necessary to get established, and meet your ongoing tax and compliance obligations. To find out more about how we can facilitate your investment in Mexico, contact us here to schedule your consultation today.