Companies with hospitality assets are one of the greatest candidates for international expansion as guests look for brands they know and trust when considering a visit to locations they don’t know. The presence of a recognizable brand is important for multiple reasons: confidence in the product/service, trust when spending money in advance (of their trip), membership programs, and a myriad of other creature comforts.

Once a growing client-base has been established, the company will have a much greater rate of success after they begin to establish new international locations. Therefore, it is imperative that a Company has all of the correct elements in-place to ensure their Mexican acquisition, which will also help them mitigate risk and reduce the loss of time and money.

One of the first—and most important—action items will be to set-up a Mexican entity. Working with a good legal team, the company will determine how they want to organize their structure. There are several different options and the company will have to determine which structure is best for its operation. The Company can choose to be a Sociedad Anónima de Capital Variable (S.A. de C.V.), which is most similar to a Limited Liability Company in USA.

An alternative option is an S de R.L. de C.V. (which is Sociedad de Responsabilidad Limitada de Capital Variable). From our experience, these are the most popular options used when purchasing land or an existing resort. A good legal team will review the needs of the company, the investment horizon, the long-term objectives and apply the proper entity and tax structure. We advise this to be part of the initial stage as it can require as long as six months to complete the company formation.

Once a company has aligned its corporate structure, it will begin to establish a bank account, the tax registry and any municipal permits required for business operations (buying/selling). Depending on business operations, a meeting with SAT (the Mexican Tax Bureau) can either be a one-day meeting or it can be multiple visits. Be sure your legal/tax team schedules in advance and adheres to the hours of operation and holidays.

During the Coronavirus pandemic, it was and has been a very complicated element of the purchase process as many government offices have been closed and/or operating with limited hours. Without considering these limitations, this one small step could delay the process for weeks and even months.

Depending on where the foreign investment originates from, the most logical next step will be to transfer money into the new Company’s bank account. Since the new entity will hold title and have ownership of the property, it may be important that purchase funds come from the entity’s bank account. There are ways around this, but it is suggested that companies follow this scenario as it has proven to be the path of least resistance. It will also help the accounting team begin their books with an initial investment and capital outlay.

Once these elements have been established, the company will be ready to proceed with their purchase. At this point, if they have not been started already, this is a good time to begin (or review if already started) budgets and timelines of the development project. As soon as the property closes and title changes hands, assuming the municipal and township permits are in-place, the new owner can begin hard costs and construction.

At the very least, the construction crews can begin grading the property and building walls around the perimeter. However, once this process begins, we always see success in those projects that don’t stop or delay. Therefore, use the time during Corporate formation to review these details meticulously so that you can hit the ground running.

Please note that each company is different and the suggestions made here are not best fit for all companies. Be sure to consult your Land & Building Specialists, your Real Estate Advisor and your legal and accounting teams to find the best fit for your company structure. Our team will be happy to consult and share best practices.