BajaNomad

FM3 status

halcyondays - 11-22-2010 at 01:54 PM

The property we are buying in Baja will be purchased under a corporation (LLC) which our realtor is assisting us setting up.

As I understand we must also have an FM3 in order to have a house, trailer, boat, or car on the lot full time.

Is this true??

Also....is it possible our LLC could buy the lot and then we be rejected for FM3 status? Meaning we would not be able to build the house?
Or do we need to have our FM3 in order to get the corporation set up?

And will we need to re apply for the FM3 each and every year?

Thanks!!!

CortezBlue - 11-22-2010 at 02:03 PM

I am not sure if it is a requirement, however, I would assume that with a corporation you would need an FM3

Please be aware that if you purchase under a corporation, IT MUST be a honest to goodness corporation that is making money. You CAN NOT buy a home with a corporation that is their only for the purchase of the property, you can very easily loose your property.

Again, don't get me wrong, if you have a legitmate corp and you will be working in Mexico, you are good.

Also, you want an FM3 in order to have a legal leg to stand on if your should need to defend yourself in any legal matter.

Riom - 11-22-2010 at 02:06 PM

Quote:
Originally posted by halcyondays
The property we are buying in Baja will be purchased under a corporation (LLC) which our realtor is assisting us setting up.


What advantage do you expect from putting a Mexican property into a US-based LLC?

Normally, property in Mexico (in border and coastal areas) is brought with a Fideicomiso (bank trust) in a personal name. It can be done in the name of an llc, but that adds another layer of powers of attorney, apposilles etc for those who act on behalf of the llc.

If your llc owned the house, vehicles etc I suppose in theory you wouldn't need an FM3 for yourself, but then you can't get a drivers license, can't register a car, can't legally stay more than 6 months at a time etc. Get the FM3, it's one of the world's easiest to get an cheapest residence permits. Yes, renew it each year.

An LLC owning your land or house may mean you can't use the ownership of it to reduce your FM3 income amount. May mean commercial rates for electric, or at least more paperwork to prove you can act on behalf of the llc.

Which comes back to the original question: is there a pressing reason to buy via a foreign (US) LLC? It adds a lot of complications.

(edit: I've assumed from your use of the US-specific term LLC that you're talking about an LLC rather than a Mexican corporation. A Mexican corporation is not suitable for a purchase of a single lot/home - don't do it).


[Edited on 2010-11-22 by Riom]

djh - 11-22-2010 at 02:56 PM

Quote:
Originally posted by halcyondays
The property we are buying in Baja will be purchased under a corporation (LLC) which our realtor is assisting us setting up.

As I understand we must also have an FM3 in order to have a house, trailer, boat, or car on the lot full time.

Is this true??

Also....is it possible our LLC could buy the lot and then we be rejected for FM3 status? Meaning we would not be able to build the house?
Or do we need to have our FM3 in order to get the corporation set up?

And will we need to re apply for the FM3 each and every year?

Thanks!!!


A Mexican Corporation is not a simple, easy, or inexpensive task. It SHOULD be left to an attorney who specializes in such ~ better yet an attorney who is a Notario Publico, so that (s)he can assist with BOTH the incorporation AND the transfer of title INTO the corporation.

I doubt that you mean an American LLC . . . right ?

A Mexican corporation DOES require that the director (president) of the corp. have an FM-3.

You CAN put property into a Mexican Corporation - but it must be for corporate / business use. You CAN build on the property as long as you also concuct business on the property. (IE. don't build a residence [only] and try to avoid a Fidecommiso by way of incorporation ~ it is not appropriate and will NOT really save you any $ anyway because of incorporation costs, annual required filings and fees, and accountant fees . . . ! )

In many (most ? / all ? ) cases, your property cannot be used for business / income producing unless it is held by a corporation.

And, of course, you cannot generate income / work / conduct business / leave personal property ~ in Mixico without your FM-3 (Lucrativa or working residency for the work / business options), so the obvious first step is to get your FM-3 (Lucrativa).

Been there, done that, and I've had no trouble ~ I researched and studied, started out right and did it all with the proper legal assistance of attorney / Notario ~ and I have my local accountant (also a friend after these years) KEEP my corporation legal by ensuring that all the necessary filings are done properly and timely - I kind of doubt most of us could do that ourselves as non-citizens...

I'm not an expert, but I know when to ask for one :-). Bob and Susan and others here, have also incorporated for property and business for legitimate reasons and may have additional thoughts and precautions to share too.

djh

MitchMan - 11-22-2010 at 05:54 PM

Owning your home by way of a Mex Corp will raise your property taxes over what the taxes would have been had you obtained the property via a fideicomiso. Also, accountants charge about $85 to $100 USD per month to do the mandatory monthly internet tax filings and then an extra cost to do the annual tax filing. And that is if you only have zeros to file with no expenses or income. It's more if you have actual expenses. Also, you will have to pay someone (unless you can do it yourself) to do your annual Secretaria de Economia filing for the corp. Also, the FM3 for being the owner/manager of the corp is a little more expensive and more detailed filing than the FM3 required if you are merely a homeowner thru a fideicomiso. Now, if you don't live in Baja all year round, you have to make sure that you are present in Baja in the month that your Economia filing is due if you do it yourself.

Also, you will need to get electronic signatures for yourself and your corp, renewable every two years. More fees to have that done if you don't do it yourself. Also, you will need to get bank checking accounts that require an ongoing base balance of $500 USD. Any business expenditiure over $2,000 must be in the form of a business check to be tax deductible AND you need to get that special pain in the neck invoice known as a "factura" from any and all vendors if you want that business expenditure to be tax deductible.

Personally, I don't think that it is at all worth the trouble just for a residence especially if you don't live there all year round, and I do believe that it is much more expensive due to the cost of the tax accounting services and filings. Secondly, it is not permitted unless the residence is in fact used for business and that needs to be evidenced by ongoing incurrance of business expenses and receipt of income that must be detailed-filed every month.

You used to be able to put your corp on suspension if you don't acutally incur expenses or receive income and therefore not have to do or pay fees for preparation of monthly tax filings, but as of the beginning of this year, that's not possible any more, you still have to file, even if the amounts are all zeros. The whole thing is just a massive pain in the arse. That and the rediculous labor laws and even more rediculous behavior of the mostly lazy work force, it just aint worth it. Most Mexican independent contractors don't do it and just do everything on the cash basis and either report nothing personally annually or very little of the actual.

Be careful with tying yourself down with a corp. Be mindful of the requirement to be in town when you have to do certain filings as airfares are getting more expensive, especially at certain months of the year.

Here's the kicker. If you want to do any changes to the stock ownership, that will cost you an arm and a leg in legal fees and Notario fees and other filing fees. In the USA, if you have a corp, you can issue stock, cancel stock, sell stock with no problem. You can do it yourself, no charge. In Mexico, tons of red tape and fees and time. Nope, don't do it unless you absolutely need a corp for actual business purposes and if the amount of business activity actually warrants a corp.

[Edited on 11-23-2010 by MitchMan]

halcyondays - 11-22-2010 at 08:28 PM

Thanks for the info!
Not much different than the US really.
I run a business here ---commercial fisherman---and it's even more complicated than that.
That being said I was sort of hoping to 'relax' in Baja.

But we also thought of renting our place out when we were gone.
Would n't that require a corporation to rent out our house when we are not there?
And doing any real business down there would require a corp right?

I would like to make money in Baja if possible.
And being a business owner here it makes sense I would want to do the same in Baja.

Again thanks for the info and I love your insight!
Hope to get more answers from you.

Are you saying also that if I sell the house it will be a real pain in the arse since is would be corporate owned?

Thanks!

MitchMan - 11-24-2010 at 09:39 AM

I don't think selling the house is any more or less troublesome because of its being owned by your corp. In Baja, the seller as either an individual or a corp doesn't really have to pay any of the costs except sales commission if you use a real estate office and taxes on gain of sale. Pretty much, that's it.

I have heard, however, but I don't know for sure, if you don't need the corp after the sale of the residence, then you would want to close down the corp and dissolve it. I have heard that may be costly in legal fees, filing fees and accounting fees, but I don't know for sure. Maybe someone else can chime in on that.