BajaNomad

Owning and living with a corporation in Baja

DianaT - 3-4-2010 at 09:09 AM

I know this has been discussed many times, but I hope someone will be able to accurately sum it up---if that is possible considering the ambiguity in many laws. :biggrin:

We currently have a fideicomiso (sp??) for our home in Baja. However, there may be changes in the near future that involve business.

My understanding is that if one owns property in a corporation that one can not use that property as a second home or even a vacation home, but solely for a business. ?????

What if they are running a home based business???

I have searched the web and seem to find information that is not very clear---maybe it is my muddy old mind. :biggrin:

One more question to add. How expensive and how difficult is it to get one's FM3 changed to allow the running of a business?


[Edited on 3-4-2010 by DianaT]

Dave - 3-4-2010 at 10:00 AM

Changes in Mexican law now allow a foreigner to own/operate a small business without the necessity of forming a corporation.

My question is this:

Why would you wish to dissolve the trust in favor of a corporation? What benefits do you perceive?

DianaT - 3-4-2010 at 10:07 AM

Quote:
Originally posted by Dave
Changes in Mexican law now allow a foreigner to own/operate a small business without the necessity of forming a corporation.

My question is this:

Why would you wish to dissolve the trust in favor of a corporation? What benefits do you perceive?


It would be different property.

Do you know how they define "small business"?

Dave - 3-4-2010 at 10:22 AM

Quote:
Originally posted by DianaT

Do you know how they define "small business"?


Defined as maximum net revenue and is flat tax based.

bajajudy - 3-4-2010 at 10:37 AM

With an FM3 or FM2 you can become a persona fisica(not sure on the spelling) and you dont need a corporation. Your FM3/2 will state exactly what you can do. If the activity is not listed on your FM3/2, you cannot do it.
Find a good accountant(you will have to have one unless you understand Spanish REALLY well) and let him guide you.

Edit to add
You can live on your property if you are a persona fisica.

[Edited on 3-4-2010 by bajajudy]

MitchMan - 3-4-2010 at 12:14 PM

Beware, beware, beware.

If you have a Mx Corp, you must pay an accountant to file your revenues and expenses electronically to the Hacenda (Mx IRS) every month and then do an annual filing. That can be expensive. You will need to get an electronic signature (for the monthly internet Hacienda filings) personally and for the corp (that will cost you to have someone knowledgeable help you accomplish that) and those signatures require renewal every two years. Each and every bonafied tax deductible expense that you incur must be evidenced by a formal expense receipt known as a "factura" or it will not be recognized by the Hacienda. Not all vendors that provide services or goods are formalized enough to be able to give you a factura. Getting a factura for each and every deductible expense is a pain in the neck and an additional time delay, especially for the small expenditures.

You must have a corp checking account as any expense that is equal to or greater than $2,000 pesos must be paid with a corp check or it won't be allowed as a deduction. The corp checking account must maintain a peso balance of over $5,000 pesos at any one time. (maintaining a corp checking account has its own problems, and there are many "gotcha's"). Also, you need to do an annual filing with the Secretaria de Economia". You will probably need professional help ($) with that the first few times you file and probably after that.

There are other considerations (in my opinion, problems) with a Mex Corp. Make sure that you diligently do your research on all the pros and cons and complete information is nearly impossible to get. Mexican accountants and attorneys are not open and forthcoming with the info, they will not volunteer ALL the information that you will need. You have to go to many different sources and Mexican so called professionals are a little confused themselves on the current facts as you will get different and inconsistant info from them all.

If you want to incorporate for business reasons that have nothing to do with where you operate your business, that's one thing. But, if you want to convert your personal residence to corporate real estate in order to get depreciation and other real estate related business operating and maintenance expenses as business tax deductions, then you must do just that, i.e., convert your personal residence to corporate property.

If you are transfering ownership of your residencial real estate to your Mex corp, you then will not be able to avoid the tax upon the sale when you sell the property because you will have converted your personal residence to business owned property (while they are physically the same property, they are not the same tax wise. That means you will be sujbect to the higher of the IETU or regular corp income tax on the taxable income from the sale.

The cost of changing the FM3 will be the least of your problems.

Do your research.



[Edited on 3-4-2010 by MitchMan]

DianaT - 3-4-2010 at 12:39 PM

Quote:
Originally posted by bajajudy
With an FM3 or FM2 you can become a persona fisica(not sure on the spelling) and you dont need a corporation. Your FM3/2 will state exactly what you can do. If the activity is not listed on your FM3/2, you cannot do it.
Find a good accountant(you will have to have one unless you understand Spanish REALLY well) and let him guide you.

Edit to add
You can live on your property if you are a persona fisica.

[Edited on 3-4-2010 by bajajudy]


Thanks Mitchman for all the good information about Mex corporations. Our possible plans do not include our current home, however, so it would not be put in the corporation.

We are thinking more in the near future and a different place. So Judy, are you saying that you can live on your property if it is owned by your corporation?

Thanks

Bob and Susan - 3-4-2010 at 12:52 PM

a house that you live in CANNOT be held by your corp unless its part of the "money-making" machine

i think judy is saying...
you can live in your fido house and "work" with permission

mitch is right...there are LOTS of things you need to do monthly
and it DOES cost $$$$

why do you want to WORK???

MitchMan - 3-4-2010 at 12:58 PM

The intent of Mexican law is to NOT have anyone "live" in their own corporate owned residence. Corporations are intended to have ownership of only business property. But to blythely say "you can live in your corporate owned house" because you have the proper FM3 and your are the persona fiscal and completely treat and use the property as only a personal residence is not at all correct or even a legal practice.

On the other hand, what you can succesfully get away with and never be discovered is quite another thing. Just be clear on what is law and what your chances are for getting away with stuff. They are not the same.

Don Alley - 3-4-2010 at 05:26 PM

I'd also look into the procedures for shutting down a corporation, should you wish to at some point. I've been told it's not easy, that it's expensive, and that it's time consuming, and of course in the meantime all the monthly requirements of a corporation must still be met.

But whatever, good luck with your venture.

Dave - 3-4-2010 at 06:22 PM

Quote:
Originally posted by Don Alley
I'd also look into the procedures for shutting down a corporation, should you wish to at some point. I've been told it's not easy, that it's expensive, and that it's time consuming, and of course in the meantime all the monthly requirements of a corporation must still be met.


You can easily place your corporation in hibernation. Simple yearly filing showing no taxes due.