CHOOSING THE RIGHT CORPORATION: CORPORATE TYPES IN MEXICO
In the complex business world, the choice of the type of corporation is crucial for any entrepreneur or businessman. Each type of corporation has its own characteristics and advantages, and the right choice can make all the difference in the success and efficient operation of a business corporation. In Mexico, the most common types of corporations are the Sociedad Anónima (S.A.), the Limited Liability Company, Sociedad de Responsabilidad Limitada in Spanish (S. de R.L.) and the Simplified Joint Stock Company, Sociedad por Acciones Simplificada in Spanish (S.A.S.). The following is a brief description and comparison of these options.
Sociedad Anónima (S.A.)
The S.A. is the type of corporation designed for large businesses and capitals, where the admission of new shareholders depends mainly on their contributions. For this purpose, the S.A. facilitates the admission and exit of shareholders, as well as the transfer of shares.
This corporations are formed by at least two shareholders, whose liability is limited to the amount of their contributions, with no minimum capital. This type of corporation is also characterized by having three bodies: the shareholders’ meeting, where the owners of the corporation make the most relevant decisions about it; the administrative body, where the administrators carry out the necessary steps for the ordinary operation of the corporation; and the supervisory body, where the statutory auditors oversee the proper performance of the powers of the administrators.
Limited Liability Company, Sociedad Anónima in Spanish (S. de R.L.)
The Limited Liability Company is the type of company designed for small businesses, or family businesses, where the admission of new partners depends on the trust among its members. Based on this assumption, the Limited Liability Company establishes stricter rules for the admission of new partners and the transfer of corporate shares.
The Limited Liability Company is formed by at least two partners, but no more than fifty, whose liability is limited to the amount of their contributions, with no minimum capital. This type of company has three corporate bodies, the assembly of partners and the administrative body, similar to the Sociedad Anónima. Regarding this point, it is important to mention that Limited Liability Companies can dispense with a supervisory body, partly thanks to the trust existing among the partners.
Simplified Joint Stock Companies, Sociedad por Acciones Simplificada in Spanish (S.A.S.)
The Simplified Joint Stock Company, Sociedad por Acciones Simplificada in Spanish, was created in 2016, with the intention of facilitating the incorporation of commercial companies, with the possibility of doing it online, to facilitate that the informal economy can transition to the formal economy.
The Simplified Joint Stock Company is incorporated online, with at least one person, with no minimum capital. Like the Limited Liability Company, it has only two bodies, the shareholders’ meeting, and the administrative body. In this case, a supervisory body is not necessary since the administration of the S.A.S. must be in charge of a shareholder, who in many cases is the only one.
It is important to emphasize that the shareholders of the Simplified Joint Stock Companies cannot be shareholders of other companies and, in case their annual income exceeds the amount established by the General Law of Mercantile Companies, they must be transformed into any other type of company established by said law.
The choice between these types of corporations depends, among other factors, on the number of partners, the relationship between them and the management preferences. Each type of company has its own advantages and legal considerations. Before making a decision, it is important to consult a lawyer to make sure you choose the option that best suits your needs and objectives.