Doing Business In (Insert Country Name Here) - Department of ...

Before signing an agent/distributor agreement, all parties should fully understand theterms and conditions and the relationship to be developed. Many relationships arestrained because insufficient time is invested in developing a full understanding of whatis expected.The Commercial Service and other organizations, such as the American Chamber ofCommerce in Mexico and U.S. state government representative offices, maintain lists ofMexican agents/distributors, manufacturers, Mexican government offices, and privatesector trade organizations. After identifying a suitable agent/distributor, the U.S.exporter is strongly encouraged to conduct a commercial background check on theMexican firm. The U.S. Commercial Service offers an International Company Profilereport that provides background information on a potential business partner.If the product is new to the market, or if the market is extremely competitive, advertisingand other promotional support should be negotiated in detail with your representative.Product and industry knowledge, track record, enthusiasm, and commitment should beweighed heavily. It is suggested that the U.S. exporter schedule annual visits ofMexican personnel to the U.S. company for training. Another factor to consider isfinancing, as the commercial and industrial sectors’ resources are limited due to highinterest rates. Joint venture arrangements should also be investigated to strengthenmarket penetration. Direct marketing and telemarketing are still evolving marketingstrategies, but they are gaining in popularity and scope.Establishing an OfficeReturn to topFor U.S. companies interested in establishing a presence in Mexico, the General Law ofMercantile Organizations (or the Civil Code) regulates many different forms of businessentities. The type of business incorporation that a U.S. company or individual chooses isextremely important as it determines the operations they are allowed to perform inMexico and, among other liabilities, the amount of taxes they pay.Some of the most commonly used types of business classifications are the SociedadAnonima (Corporation) identified with "S.A." at the end of the company name, and theSociedad Anonima de Capital Variable (Corporation with Variable Capital) identified with"S.A. de C.V." One of the advantages of the latter is that the minimum fixed capital canbe changed subsequent to the initial formation.Limited Liability Partnership (Sociedad de Responsabilidad Limitada) identified with "S.de R.L." is similar to a closed corporation in the U.S. and has the option of havingvariable capital (S. de R.L. de C.V.). As this is an organization formed by individuals, ithas similar characteristics to a partnership with the exception of unlimited liability.Civil Partnership (Sociedad Civil) is the most common organization for professionalservice providers. It has no minimum capital requirement and no limit on the number ofpartners, but it is taxable in the same way as a corporation. It is identified with "S.C."Civil Association (Asociación Civil) is the form that charitable or nonprofit organizationsadopt to operate and is identified with "A.C." A foreign company may open a branch(“sucursal”) in Mexico as an alternative to incorporating. A branch can provide rightsand responsibilities similar to a corporation, including tax liability and access to localcourts, but requires the approval of the National Foreign Investment Commission.