How to Register a Business in the US from Mexico

Step 1: Benefits of starting your US business from Mexico

Starting a US business from Mexico offers numerous advantages that can significantly contribute to your enterprise's success. One of the primary benefits is the cost-effectiveness associated with operating from Mexico. With lower living costs compared to the US, expenses related to labor, office space, and daily operations can be substantially reduced. This allows for better allocation of resources towards essential business growth activities, such as marketing and product development. Additionally, leveraging the strong USD-MXN exchange rate can further optimize financial planning, enabling you to achieve more with a smaller budget.

The geographical proximity between Mexico and the US is another significant benefit. This close location facilitates easier communication and more efficient logistics, ensuring that goods and services can be transported swiftly across borders. Moreover, time zone similarities streamline real-time communication with partners, clients, and colleagues in the US. The cultural familiarity and bilingual capabilities of many Mexican professionals also play a crucial role in bridging gaps, fostering effective collaboration, and creating bi-national business opportunities. Ultimately, starting a US business from Mexico can provide you with a strategic advantage, combining the strengths of both countries for optimal business performance.

Step 2: How to start your US business from Mexico

Starting a US business from Mexico involves several critical steps. First, you need to decide on the type of business entity you wish to form, such as a corporation, limited liability company (LLC), or partnership. Each entity type has different legal and tax implications, so it’s crucial to consult with a legal or financial advisor to find the best fit for your business goals. After choosing the entity, you will need to register your business with the relevant US state where you plan to operate. Requirements vary by state, but typically involve filing articles of incorporation or organization and paying applicable fees.

Secondly, obtaining an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) is essential. This unique number is used for tax purposes and is necessary for opening a US bank account, hiring employees, and filing taxes. Additionally, setting up a US bank account is important for managing your finances and facilitating transactions. Many US banks offer services for international business owners. Lastly, ensure compliance with US laws and regulations, including immigration laws if you plan to spend significant time in the US for business purposes. Working with a professional familiar with cross-border business operations can make the process smoother and more efficient.

Step 3: Opening a Business Bank Account

A business bank account is a separate account that is used exclusively for business transactions. But why is it important to open a business bank account?

Keeping your personal and business finances separate is crucial. A dedicated business bank account allows you to do just that, making it much easier to track your business’s income and expenses. This clear separation translates to simpler tax reporting come tax season.

But the benefits go beyond bookkeeping. Having a separate account can provide legal protection. It establishes your business as a distinct entity from yourself. In the unfortunate event of a lawsuit or bankruptcy, this separation can help shield your personal assets from business liabilities.

Furthermore, a business bank account can boost your credibility and project professionalism.

It demonstrates to clients and vendors that you take your business seriously and are committed to maintaining accurate financial records. This can be especially important in establishing trust with potential partners.

Finally, a business bank account is essential for accepting payments, even if you utilize a merchant account. Whether you use doola or another service, funneling those customer funds into a dedicated business account is necessary.

doola partners with banks that allow you to open a bank account remotely from anywhere in the world, like Mercury. Shop around and compare different banks’ fees and services.

Look for a bank that offers the features you need, such as online banking, mobile banking, or overdraft protection.

You may also want to consider working with a bank that specializes in small business banking.

Step 4: Understanding Your Compliance Requirements in Mexico

Understanding Compliance Requirements for Running a US Business in Mexico

Operating a US business in Mexico involves navigating a complex web of compliance requirements. Here are some essential considerations to help you get started.

Legal Framework

Understanding the legal framework is crucial when entering the Mexican market. The primary areas to focus on include corporate structure, labor laws, tax obligations, and trade regulations.

Corporate Structure

Choosing the appropriate corporate structure is a key first step. Common options include:

• Sociedad Anónima (SA): Similar to a corporation, with shareholders having limited liability.
• Sociedad de Responsabilidad Limitada (SRL): Comparable to a limited liability company (LLC), combining flexibility with limited liability for members.

Labor Laws

Mexican labor laws are established by the Federal Labor Law (Ley Federal del Trabajo). Key considerations include:

• Employment Contracts: Ensure all employees have written contracts outlining their terms of employment.
• Benefits: Mexican law mandates specific benefits, such as profit sharing, vacation days, and Christmas bonuses.
• Work Hours: Standard work hours are 48 hours per week. Overtime pay and worker protections must be adhered to.

Tax Obligations

Compliance with tax laws is vital for avoiding penalties and ensuring smooth operations. Essential tax considerations include:

• Corporate Tax: A standard corporate tax rate applies, and businesses may also be subject to the Value Added Tax (VAT) on goods and services.
• Employee Withholding: Employers must withhold income tax and social security contributions from employees' wages.

Trade Regulations

For businesses involved in importing and exporting, it is important to be familiar with Mexican trade regulations and agreements. Consider the following:

• Customs Procedures: Understand the documentation and procedures required for smooth cross-border trade.
• Free Trade Agreements: Leverage agreements such as the United States-Mexico-Canada Agreement (USMCA) to benefit from reduced tariffs and enhanced market access.

Local Permits and Licensing

Local and state regulations may require additional permits and licenses. Some considerations include:

• Business Permits: Obtain the necessary permits to legally operate your business in a specific location.
• Industry-Specific Licenses: Certain industries may require additional licensing, such as food and beverage, healthcare, and telecommunications.

Conclusion

Running a US business in Mexico involves careful planning and adherence to various compliance requirements. By understanding corporate structures, labor laws, tax obligations, trade regulations, and local permits, you can ensure a successful and compliant operation in the Mexican market.

doola offers a Total Compliance package, including bookkeeping services, to help you stay on top of your compliance requirements. This ensures your business operates smoothly and adheres to all legal and regulatory standards.

Step 5: Understanding Your Tax Obligations in Mexico

Understanding Tax Obligations for Running a US Business in Mexico

Expanding your US business into Mexico can open up new opportunities, but it's crucial to understand the tax obligations involved. Navigating Mexico's tax landscape may seem daunting, but with the right information, you can comply with local regulations and avoid potential pitfalls.

1. Corporate Income Tax

The primary tax you will encounter is the corporate income tax. In Mexico, the standard corporate income tax rate is 30%. This tax applies to the global income of Mexican resident companies, which includes any income derived from the US business operations within Mexico.

2. Value Added Tax (VAT)

Mexico imposes a Value Added Tax (VAT) at a rate of 16% on most goods and services. As a US business operating in Mexico, it's important to understand which of your transactions are subject to VAT and ensure proper collection and remittance.

3. Permanent Establishment

Determining whether your business has a permanent establishment in Mexico is crucial. A permanent establishment generally refers to having a fixed place of business in Mexico. If your US business has a permanent establishment in Mexico, you will be subject to Mexican tax obligations on the income attributable to this establishment.

4. Transfer Pricing

Transfer pricing rules are designed to ensure that transactions between related parties are conducted at arm's length. This means that the prices charged in intercompany transactions must be comparable to those charged between unrelated parties. Compliance with Mexican transfer pricing regulations is essential to avoid penalties and ensure accurate reporting.

5. Double Taxation Avoidance

Double taxation can occur when income is taxed in both the US and Mexico. Fortunately, the US and Mexico have a tax treaty designed to prevent double taxation. The treaty provides mechanisms for relief, such as tax credits or exemptions. Familiarizing yourself with this treaty can help minimize your overall tax liability.

6. Social Security Contributions

If you have employees working in Mexico, you are required to contribute to Mexico's social security system. Contributions are made to the Mexican Social Security Institute (IMSS) and cover various benefits, including health insurance, disability, and retirement. The contribution rates vary based on salary and benefits provided.

7. Professional Advice

Given the complexity of tax regulations in Mexico, it is advisable to consult with a tax professional who has expertise in both US and Mexican tax laws. They can provide tailored advice to ensure compliance and optimize your tax strategy.

• Consult with tax advisors
• Stay updated on changes in tax laws
• Ensure accurate record-keeping

Understanding and complying with Mexican tax obligations is essential for the success of your US business in Mexico. By taking into account the considerations outlined above, you can navigate the tax landscape effectively and focus on growing your business.

It’s a good idea to consult with a tax professional or an accountant (or to hire these roles in-house) to make sure you’re not missing anything.

doola's Total Compliance package can handle your tax filings for you, ensuring you remain compliant with federal, state, and local tax requirements.

Step 6: How doola Can Assist

doola simplifies the incorporation and setup process for your company, ensuring you’re ready to charge customers, hire your team, and raise funds as quickly as possible.

Fill out your company details in the doola form in less than 10 minutes. Then, we’ll incorporate your company in any of the 50 US states, get your IRS tax ID (EIN) for you, and file your 83(b) tax election if needed. 

doola can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

doola founders also gain access to exclusive discounts at leading software partners, one-click onboarding with select partners, and free CPA consultations.

The doola Application

It takes less than 10 minutes to fill out the details of your new company. You’ll choose your company structure (C corporation, limited liability company) and pick a company name.

Our instant company name checker will let you know if it’s available before you submit your application. You’ll add an address and phone number and review and sign your EIN SS4 letter in one click.

Forming the Company

doola will review your application and file your formation documents in the state within one business day. doola charges $297 for our Starter Plan and your first year of registered agent services (a state compliance requirement), and $297 each year thereafter to maintain your registered agent. 

You can also opt for our Total Compliance plan.

Getting Your IRS Tax ID (EIN)

After your formation in the state is complete, doola will file for your company’s IRS tax ID. Founders who provide a US Social Security number, US address, and US phone are eligible for expedited processing. All other users will receive standard processing. 

For standard orders, doola will fax your form SS4 to the IRS and then call the IRS to retrieve the EIN for you to expedite the process if we can, using real-time IRS data to determine when your filing is likely to be available.

Filing Your 83(b) Tax Election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. doola can file and mail your 83(b) tax election in one click for both US and non-US founders — no trip to the post office required.

We’ll file it using USPS Certified Mail with tracking, and you’ll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner Perks and Discounts

doola partners with a range of third-party tools to offer special pricing or access to founders. We offer discounts on engineering, tax and finance, compliance, and operations tools, including Amazon Web Services.

doola also partners with Mercury to provide faster, automatic onboarding using your doola company information so you can get ready to bank and fundraise even faster.

Founders may also access discounts on other doola products, including up to one year of free credits toward payment processing.

Read our guides for startup founders, or learn more about doola and how we can help you set up your new business quickly and easily.

Turn your entrepreneurship dream into reality today!

We do our best to provide accurate and up to date information, however the information provided here are just guidelines. Please speak with a tax and compliance professional in your country