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Mexico is one of the 20 most expensive countries to start a business (according to Business Financing)

It is urgent to simplify the incorporation of companies in Mexico to complement the economic reactivation actions: ASEM.

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.

Within the framework of the project "Economic reactivation of MSMEs in Mexico through fiscal policies and the simplification of procedures for the incorporation of companies" , the Association of Entrepreneurs of Mexico (ASEM), with the support of the Friedrich Naumann Foundation for Freedom , and the academic support of the Tecnológico de Monterrey ; carried out an analysis on the challenges and opportunities for the incorporation of companies in Mexico.

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The project evaluates the most traditional commercial company in our country, which is the “Sociedad Anónima” (SA), which represents 85% of the legal entities in Mexico. It is revealed that, if the process of its constitution were carried out online and at no cost, the MSMEs could have invested up to 1.37 billion pesos in their productive development and mitigate the effects of the 2020 crises, and not in paperwork. This could also represent an important support to face the reduction of 45% (2.95 billion pesos) in the budget of the Ministry of Economy, the department responsible for the implementation of the public policy to support entrepreneurs and MSMEs, foreseen in the Expenditure Budget Project of the Federation 2022.

Additionally, it was identified in the analysis that, in 2020, before total or partial closures of public and private procedures, 29% fewer Public Limited Companies were created compared to 2019. This reinforces the importance of digitizing their incorporation process.

Although it is currently possible to establish a “Simplified Stock Company” (SAS) online and at no cost, based on a study carried out by the three institutions to entrepreneurs throughout the country, it was identified that 41% did not establish their company as SAS because he did not know about the existence of this type of commercial company and 35% because it was not suitable for the profile of the company's activities. Additionally, those who did constitute a SAS, pointed out as main disadvantages: ignorance of the mercantile company by banks and other entities (31%), operational problems of the platform of the Ministry of Economy where the SAS are created (27%), as well as little flexibility and compatibility with other types of companies (21%).

Image: ASEM

Even with these limitations, the SAS have proven to be of great value and a first step for the digitization of company incorporation. In fact, based on information from the Ministry of Economy, it is estimated that since its entry into force in September 2016 and until January 2021, 44,549 SAS have been established, which could represent savings of up to

1.11 billion pesos for micro and small businesses. On the other hand, unlike the Public Limited Company, which does not have its constitution process digitized, in 2020 more SAS were created compared to 2019.

Some of the main characteristics of the SAS are: incorporation of the company in 1 day via the Internet and at no cost (without the need for a notary or payment of registration fees); formation from a single partner (sole proprietorship) or from more partners or shareholders who are natural persons; and an annual income limit of 5.8 million pesos.

Image: ASEM

Although the SAS represents a first step for the digitization and simplification of the constitution of mercantile companies, it is still perfectible at the legislative and operational level. Therefore, it is proposed:

  1. Increase to $ 35 million pesos the maximum annual income allowed.
  2. Make the payment of income tax (ISR) more flexible for sole proprietorships that have up to $ 3.5 million pesos in annual income.
  3. Carry out corporate acts, which require protocolization, online and at no cost.
  4. Allow any natural person to be a member of a SAS.
  5. There are also 7 operational and functional recommendations, among which the following stand out: carry out promotional campaigns on the benefits and process to create a SAS; eliminate intermittences in the operation of the platform and in its interface with other government entities; as well as integrating the majority of traditional financial institutions (banks) and non-traditional (fintechs) to open bank accounts at the end of the creation process of each SAS.

Regarding the SA, 4 proposals are made to digitize and optimize it:

1. Incorporate it online and in one day.

2. Eliminate incorporation costs, having as optional the hiring of notarial services (as is currently the case with the SAS).

3. That they are constituted from a single partner or shareholder, with which sole proprietorships could be created.

4. Carry out corporate events online and at no cost.

The above not only evidences the need to generate a better panorama for the well-being of Mexican MSMEs, which are a fundamental engine for the development of the country, but also that government authorities such as the Ministry of the Economy and the Chambers of Deputies and Senators, update, improve and strengthen the SAS and its legal framework; in addition to digitizing and optimizing other types of companies, such as the SA.

The complete study is available on the website https://asem.mx/mercantil .