Choosing the right corporate structure is one of the most important decisions when forming a business in Mexico. An incorrect choice can be fiscally costly and limit future business growth.
What is an S.A. de C.V. (Variable Capital Corporation)?
The Variable Capital Corporation (S.A. de C.V.) is the most widely used corporate structure in Mexico for medium and large businesses. Its main features are limited liability of shareholders (they are only liable up to their capital contribution) and the ability to modify the share capital without needing to amend the articles of incorporation each time.
Advantages over other structures
Compared to the Limited Liability Company (S. de R.L.) and the individual with business activity, the S.A. de C.V. offers:
- Greater ease of incorporating new shareholders or investors
- Structure more recognized by banks and large corporate clients
- Ability to issue different series of shares with differentiated rights
- Lower personal asset exposure to company debts
When is the S.A. de C.V. NOT the right choice?
For small businesses with a single owner billing less than $3.5M annually, the S.A. de C.V. may impose excessive tax and corporate governance obligations. In those cases, the RESICO regime or individual business activity regime may be more efficient.
The formation process
Forming an S.A. de C.V. in Mexico requires: drafting the articles of incorporation before a notary public, obtaining the RFC and e.firma from the SAT, opening a business bank account, registering with the IMSS if employees will be hired, and registering in the state taxpayer registry. The complete process takes between 3 and 6 weeks.