Introduction
When you are thinking about moving your production to another country, it can be tough to know where to even begin. You’re dealing with a new country, which means unique laws, regulations, attitudes, customs, and culture.
Luckily, the Mexican government has spent years making it as straightforward and enticing as possible for foreign companies to set up manufacturing in the country. This is done through their IMMAX program, formerly known as the IMMEX Maquiladora program, which is essentially a piece of legislation that offers tax incentives to any foreign company that wants to set up a factory. There are many ways to take advantage of this program, but perhaps the easiest to start with is through what’s known as a ‘shelter company’.
What is a Shelter Company?
To get involved with the IMMEX program, a company needs to have a registered, legal presence in Mexico. This requires jumping through all the associated legal hoops, and applying for the required licensing. This can take a very long time – years, in some cases.
With a Shelter Company, you’re circumventing all of this – the company is already an established legal entity, and already has all of the licenses. You’re essentially using them as ‘legal representation’ while in Mexico, a ‘shelter’, allowing you to get started immediately.
This process allows a company to ‘test the waters’ when it comes to nearshoring their production – it allows you to get a sense for what it’s like to shift production to Mexico, but with no significant up-front investment of time or money.
What does a Shelter Company do?
A shelter company is more than just a legal shell for you to work from. As the license holder, and by extension the holder of all legal liability, they generally take care of all administration.
Human Resources –
A good Shelter company will generally take care of all human resource issues, including the recruitment of new employees, solving internal disputes, disciplinary issues, and letting go of poor performers.
Payroll, Taxes & Accounting –
As the ‘legal entity’ within Mexico, a Shelter Company will be keeping a close eye on the money. This would involve making sure all employees are paid on time, all benefits administered correctly, and that your company’s taxes are all accurate, and paid on time.
Negotiations With Suppliers –
As a company with years of experience and a strong local presence, a good Shelter Company will have a much better idea of what things cost, and will be able to negotiate with landlords, suppliers, and whoever else you may need to form an ongoing business relationship with inside Mexico.
With all the administration taken off your plate, you and your company are free to do what you came to Mexico to do: produce your product.
How can your business benefit from working with a Shelter Company?
Even beyond the administration, Shelter Companies offer a large number of benefits over going it alone.
Ease –
As a ‘plug-and-play’ solution, using a Shelter Company is by far the easiest way to start manufacturing.
No Legal Liability –
Since all of the legal liability falls on the shoulders of the license holder, they are the ones responsible for making sure everything reaches legal standards. They won’t allow you to do anything to jeopardize that of course, not that you’d want to, but it does mean that if something goes wrong, your business is not the party left holding the bag.
Time –
This may be the largest benefit of all. The proper legal licensing can take years, necessitating prerequisites such as a minimum yearly revenue, and you’re not guaranteed to be approved. Doing what amounts to ‘renting’ someone else’s license, however, can have you up and running in a matter of weeks. This has huge implications when it comes to opportunity costs.
In other words, aside from the assistance, using a Shelter Company allows you to leapfrog all the red tape that would otherwise be associated with starting a factory in Mexico.
Should you use a Shelter Company?
Ultimately, the choice as to whether you want to use a Shelter Company to nearshore your production is up to you, your company, and the circumstances of both. If you need a factory in Mexico and don’t yet feel comfortable going through the process of setting yourself up as a legal entity in the country for whatever reason, then it could be a great choice.
If, however, this is still too much, and you want to start even simpler, then you might consider simple outsourcing.
At Zipfox we’ve curated a large list of Mexican factories already in production that you can simply contact, and request a quote from. Click below to get started.
