The Mexican commercial legislation regulates the sole trader as one of the structures that can be incorporated for business purposes. The sole trader (or sole proprietorship) represents the simplest way to carry a business activity and it is created only for natural persons who want to have a business in their own name.
Thus, it must be noted that it is possible to open a sole proprietorship in Mexico only if you want to be the only founder of your business, as this entity does not allow the association of more investors, as can be the case for all other Mexican legal entities. Our specialists in company formation in Mexico can present the legal requirements for registering this entity, as well as its advantages.
Table of Contents
The main characteristics of the Mexican sole trader
The most important aspect is that this structure allows only 1 founder. Then, it is important to be aware of the fact that the respective founder is fully liable for the obligations of the company, as, from a legal point of view, there isn’t any distinction between the company and the founder (the sole trader does not have legal personality).
It is recommended to open a company in Mexico as a sole trader when the founder plans to have business activities that can be carried out only by the founder (therefore, it is suitable for those with limited operations, as opposed to the operations of other company types, completed by a large number of employees).
Another characteristic of the sole trader, which is also an advantage, is that it does not impose any capital requirements, making it ideal for individuals who only dispose of a small sum of money that can be invested in the business.
From a fiscal point of view, the Mexican sole proprietorship has very simple obligations, that can be carried out even by persons who are not highly specialized in financial or accounting procedures and rules. Even so, it is advisable to receive proper tax and accounting consultancy and services, and for this, you can get in touch with our accountants in Mexico.
We also mention that, during the process of company incorporation in Mexico, investors usually have to set up a corporate bank account, but for this structure, the founder is not required to complete this registration step, as his/her personal bank account is sufficient.
How to register a sole trader in Mexico
Individuals who want to open a sole proprietorship in Mexico can complete the registration procedure by themselves (please mind that, for this, you must be fluent in Spanish, as the local paperwork is issued in this language).
However, one can also set up a company in Mexico through a third party, provided that the said party received a power of attorney, a right which is granted for all Mexican business forms, including the sole trader (our team can represent clients through this legal document).
Is the sole trader a popular vehicle in Mexico?
Developing a business activity through a sole trader has become very popular in the last decade in countries from across the world. Mexico makes no difference in this sense, as the Mexican employment market is characterized by the presence of this entity. Below, we invite you to find out the current situation:
- during 2012-2023, individuals registered as self employed accounted for a rate of 30% to around 32% from the entire Mexican workforce (the data refers to more categories of individuals, not just the sole trader);
- the lowest rate was registered in 2020 (during the Covid-19 pandemic), when it stood at 30,35%;
- in 2020, according to the World Bank, there were 279,730 sole traders incorporated by women;
- in 2023, the latest available data, the percentage of self-employed individuals was of 31,35% (of the total workforce).
We invite you to contact our team for further information on the Mexican sole trader. We can present the documentation that must be submitted, along with any other obligation that can appear when setting up this entity (licenses, compliance, fees, etc.).