How do we apply for a Corporation
We need a Corporation to own land in Mexico
Attorney answers (3)
Brian Joseph Cohan
Reputation Level 10
Answered about 2 years ago.
Corporate / Incorporation Lawyer in Long Grove, IL.
It depends on the State in which you want to incorporate. Usually, Articles of Incorporation are filed with the Secretary of State or official charged with this function. You will also need to follow the corporate formalities under the State Corporation Act, as well as obtain a Federal Employer Identification Number and if appllicable, file for subchapter S status with the Internal Revenue Service. See a lawyer. The ramifications of screwing this up far outweight the nominal cost of getting it set up correctly.
DISCLAIMER- THIS IS NOT INTENDED TO AND DOES NOT CONSTITUTE LEGAL ADVICE AND DOES NOT ESTABLISH AN ATTORNEY-CLIENT RELATIONSHIP.
Thomas Martin’s answer gives you links on how to form an Arizona corporation. However, from your question, it seems you might be referring to the need for a Mexican corporation to own land in Mexico. I am not licensed to practice law in Mexico, and this answer is not intended to give you legal advice on Mexican law. I do, however, often work with Mexican lawyers and Mexican notarios públicos (notaries public) to assist our non-Mexican clients (usually U.S. and Canadian based clients) to purchase, sell and develop property in Mexico. This answer is intended to give you some general information, and is based on the information provided to me by Mexican lawyers. I have worked with Mexican lawyers in helping numerous people acquire property in Mexico. Sometimes this involves forming a Mexican corporation. Often, it involves forming a Mexican bank trust that will own the property. Sometimes, it involves forming an Arizona corporation or limited liability company (“LLC”) that will own the Mexican corporation or will be the beneficiary of the Mexican bank trust. The option that is best for you depends on your particular situation and preferences. If you would like, I’d be glad to discuss your specific situation with you or refer you to a Mexican lawyer.
First, you should understand that no corporation is required in order to own land in Mexico, though you might want to own the land through a corporation for various reasons. Non-Mexicans cannot acquire direct title to property in the “Restricted Zone” (i.e., within the area 100 kilometers from the Mexican border, 50 kilometers from the beach, and all of Baja). Perhaps this restriction is the reason you are saying you need a corporation to legally own the land. There are two legal ways for non-Mexicans to enjoy the benefits of “ownership” of property in the “Restricted Zone.”
The first is that non-Mexicans can acquire full rights to use, rent and sell property in the Restricted Zone by having title to the property transferred to a Mexican bank trust of which the buyer is beneficiary. The trust can be created for an initial term of up to 50 years, which is subject to renewal for an additional 50 years upon the request of the beneficiary. If the property is already in a Mexican bank trust, the buyer can have the beneficiary rights assigned to the buyer.
The second (for “non-residential” properties only) is through a Mexican company (which could be a corporation or limited liability company). The Mexican company may be wholly or partially owned by non-Mexicans, provided the permit and registration requirements for foreign ownership are met. However, it is important to understand that non-Mexicans can legally avoid the Mexican bank trust requirement by owning through a Mexican company only if the property qualifies as “non-residential” property. Depending on the circumstances, “non-residential” property can include houses, condos and apartments that are owned and rented as a business and such properties that are bought, developed and sold as a business. A Mexican lawyer or notary public can advise you whether the property would qualify as “non-residential” and allow you to own it through a Mexican company, rather than a Mexican bank trust (assuming you are a non-Mexican and the property is in the Restricted Zone).
If the property is not in the Restricted Zone, then non-Mexicans and Mexicans can own direct title to the property, and Mexicans can own direct title to property throughout Mexico. Under these circumstances, no Mexican company or bank trust is required.
However, even if a business entity is not a legal requirement, it may be advisable to own the property through a business entity, rather than owning it under your own name. Owning the property through a business entity may serve to protect you from personal liability (e
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However, even if a business entity is not a legal requirement, it may be advisable to own the property through a business entity, rather than owning it under your own name. Owning the property through a business entity may serve to protect you from personal liability (e.g., if someone is injured on the property and sues the owner). It can also possibly make transfer of ownership of the property easier (in case of a sale, gift or transfer on death). It is also often the best way for multiple owners to own the property. For example, the business entity provides a legal structure within which the co-owners have certain legal rights provided by law that they may modify or supplement by private agreement. Owning Mexican property through a Mexican company may be one option. Another is to have title held by a Mexican bank trust and to have the beneficiary of the trust be a U.S. company that you own. We often form Arizona LLCs or corporations to be the beneficiaries of Mexican bank trusts, and coordinate with a Mexican lawyer, notary public or trust formation service to have the bank trust formed or have the beneficiary rights of an existing Mexican bank trust transferred to our clients’ LLC or corporation.
It is highly advisable for co-owners of property to have a clear and detailed, legally enforceable agreement among themselves that establishes the rights and obligations of the co-owners, definitive voting rights and procedures, and whatever other specific agreements or rules the owners believe are important to establish at the outset, rather than leave to majority vote in the future. Such additional provisions might include restrictions on transfers of ownership interests, buy-sell agreements, super-majority or unanimous voting requirements for certain major decisions, agreements on how to divide the use of or income from the property, restrictions on or requirements for renting the property, rules regarding if and when co-owners need to contribute more money (e.g., for maintenance, mortgage, etc.), the consequences if a co-owner breaches its obligations, and mandatory dispute resolution alternatives to litigation. If there will be more than one owner, having a clear and thorough agreement that establishes the co-owners’ rights and duties and how to resolve issues and disputes is as, if not more, important than simply forming the business entity. Forming the entity itself is rather straightforward. The agreement among the co-owners (in the case of a corporation, the bylaws and shareholders’ agreement, and in the case of a limited liability company, the operating agreement) is significantly more complicated.
There are a number of factors to consider in deciding what type(s) of business entity(ies) to form. The possibilities range from no entities to having entities on both sides of the border (i.e., a Mexican company owned by one or more U.S. entities). There is also a choice between using a corporation or an LLC. One of the major factors driving the choice between corporation or LLC is the difference in taxation. You should consult an accountant who can advise you regarding the applicable Mexican and U.S. taxes, both of which need to be considered with respect to rental income, capital gains on sale of the property, and/or inheritance tax. If you would like, I can refer you to an accountant in Tucson who can advise you regarding these cross-border tax issues.
Feel free to contact me if you would like to discuss this further or would like any assistance with this.
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