What procedures are needed to set up a company and start operating in Mexico?

This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process. Opinions expressed by Entrepreneur contributors are their own.

Data from the National Institute of Statistics and Geography (INEGI) reveal that the average life expectancy of a newly formed business in Mexico does not exceed 15 years . Part of the complications of setting up a company in this country lies in the swampy and widespread bureaucracy necessary to start a project legally.

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These problems seem even worse for startups, on the one hand because they are fighting against the clock – to the extent that the ecosystem of their industries is highly competitive and an innovation must position itself quickly – and, on the other hand, because being projects of New creation generally do not have the necessary operational capacity to carry out all the procedures requested by the authority.

According to Ignacio Bermúdez Casco, Head of Product and co-founder at Tally, a legaltech platform that helps companies complete the formalities for their incorporation, “entrepreneurs, particularly the newest ones, are frequently affected by the amount of bureaucracy that they must dodge. The vast majority are unaware of the legal aspects involved in setting up a company, despite how important these requirements are. They focus on developing, perfecting and selling their product, it makes sense that they don’t have the time or knowledge necessary for more specific aspects ”.

The legal specialist adds that in Mexico, the lack of implementation of technology to make procedures more efficient has historically caused these processes to be slow and cumbersome. “The result is that companies often lose risk capital or business opportunities to launch their products and services, while waiting for the completion of a procedure.”

What procedures are needed to set up a company and start operating in Mexico?

On paper and in theory, it is not so difficult to create a business in Mexico, since the process consists of six steps:

  • Request the authorization of denomination or legal name of the company before the Ministry of Economy (response time of 3 to 4 days).
  • The drafting of the bylaws or the rules of the game between the partners
  • Notarial notarization and registration in the Public and Commercial Registry (RPC).
  • Register the company in the Tax Administration Service (SAT)
  • File the FIEL, for which you need proof of address in the name of the new company (this makes it difficult to obtain the FIEL, since it is a new company)
  • The opening of the bank account for which the FIEL of the company is needed.

However, the excess of bureaucracy and documentation to present makes each step of the process a challenge. Most of the time it requires comings and goings, waiting times that can reach three months for each part of the process, as well as risks of facing corruption on the part of public servants.

Legaltech solutions to the rescue

In this context, the use of software and technology to strengthen legal services is becoming increasingly popular. This is known as Legaltech and offers solutions that drive the development of start-ups.

“The idea behind this pairing of legal and technology is to build bridges so that entrepreneurs can exploit their ideas and talents without first having to learn to navigate obstacles that rarely have anything to do with their industries. The benefits of Legaltech solutions go beyond private interest, since by promoting the growth of startups, the immediate ones benefit with new products and services that impact their quality of life, and jobs are also created; while the ecosystem is strengthened by encouraging competition and innovation ”, considers the co-founder of Tally.

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