Open a Branch vs. a Subsidiary in Mexico – Get Help from Our Mexican Lawyers
Open a Branch vs. a Subsidiary in MexicoUpdated on Tuesday 26th April 2022
Rate this article
based on 1 reviews
based on 1 reviews
To open a branch vs. a subsidiary in Mexico is a tough decision to make without any legal help because there is no one-size-fits-all enlargement option that will work in every situation. A subsidiary's compliance, certainty, and trustworthiness might make sense for a more permanent presence. Opening a branch office may be sufficient if the growth is more hesitant or transitory. So, if you need to know whether you should open a branch vs. a subsidiary in Mexico, you can rely on our attorneys. The skilled lawyers located at our law office in Mexico can provide you with better guidance in this regard. Furthermore, our attorneys in Mexico can also help you to obtain residency in this country.
Why you should establish a branch in Mexico?
Foreign companies establishing a branch in Mexico are permitted to engage in commercial operations, including revenue-generating activities. This is especially beneficial for international enterprises that want to establish a small presence in Mexico without forming a fully incorporated organization. A branch in Mexico is treated as a separate legal company, with the ability to create bank accounts and issue invoices. Branch offices are considered permanent establishments for tax reasons. It should be emphasized that it is not treated as a different legal entity from its parent firm, and the parent company may be held accountable for the branch's acts. Because branch offices are unusual in Mexico, using them might make doing business with other Mexican firms more challenging. Keeping in view the characteristics of a branch office, you can decide whether you want to open a branch vs. a subsidiary in Mexico. Our skilled lawyers in Mexico will not only help you to open a company but they will also provide you with detailed guidance regarding company regulations in this country.
Why you should establish a subsidiary in Mexico?
A subsidiary allows you to function as a branch of a parent firm while also serving local clients in Mexico. The subsidiary in Mexico has limited autonomy from the parent firm, and the parent company is still responsible for any mistakes. The procedure of forming a Mexican subsidiary begins with deciding on a corporate name and registering with the Ministry of External Affairs (SRE). Your name should be accepted if there are no duplicates. Then you will sign a pro forma agreement that binds any non-Mexican shareholders to Mexican laws. Setting up a subsidiary in Mexico helps you to expand your business while staying out of trouble in this country. The Mexico subsidiary will be under the supervision of the parent firm. As the employer of record, the parent business will be responsible for any lawsuits, penalties, or compliance difficulties. You will also decide on the extent of autonomy for your subsidiary. Because you may adjust the subsidiary to the country's laws and cultural norms while keeping parts of the main firm in Mexico. If you still need to decide whether you want to open a branch vs. a subsidiary in Mexico, you can get assistance from our lawyers in Mexico City.
Company laws in Mexico
Different structures may be used by foreign corporations investing in Mexico as investment vehicles. A majority of economic activities in Mexico are available to international investors 100 percent under the Foreign Investment Law of 1993 and the North American Free Trade Agreement (NAFTA). The infrastructure and financial services industries, in particular, are generally reserved for Mexican investors and the government. The Mexican law governing commercial companies governs the formation of companies on a federal level, which means that the Mexican law governing commercial companies governs all company formations in Mexico. Working out a suitable structure for a company's business operations in a new area (whether domestically or globally) is a critical problem for any business moving into a new location.
A branch, often known as a branch office, is a geographical component of a larger organization that differs from the main or head office. A subsidiary is a firm that is majority-owned by another company. There are advantages and disadvantages to opening a subsidiary or branch office as part of worldwide growth. In general, a branch office is a less expensive and speedier choice. However, it entails significant compliance concerns for the organization as a whole. Any company pursuing international growth should look into all of the opportunities for establishing a presence abroad. In addition to open a branch vs. a subsidiary in Mexico, you can also rely on our lawyers for additional legal services. For instance, our attorneys in Mexico can help you obtain citizenship in this country.
Foreign direct investment (FDI) in Mexico
The FDI statistics can be a positive indicator of Mexico's post-pandemic recovery for investors interested to open a branch vs. a subsidiary in Mexico. This country has received a record amount of foreign direct investment (FDI) in the first quarter of 2021, with $11.86 billion coming in. You can find below the investment percentage in different sectors of Mexico:
- Manufacturing sector received around 46.6 percent of FDI in Mexico;
- Banking and professional services received 14.6 percent of FDI;
- The mining sector received 13.9 percent of FDI;
- Foreign commerce received 11.5 percent of FDI.