Foreign manufacturers have several options to pursue when setting up an operation in Mexico. Shelter Operations in Mexico is one of the smoothest, safest, and most competitive structures for manufacturing projects.
In this introductory article, we will summarize the reasons why the shelter operating structure continues to be very attractive. Additionally, we will outline the keys to choosing your shelter operator.
This information also applies if you have been operating in Mexico under a Shelter scheme for some time.
First of all, it is of vital importance to evaluate the different shelter formats. Whether selecting or remaining under a current Shelter Operator, there are costs, benefits, and implications to consider.
The main difference between a Multitenant Shelter and a Dedicated Shelter is how the entity is set up in Mexico. A Multitenant Shelter has multiple companies under a single Mexican entity acting as an “umbrella operation” to all companies. In the Multitenant Shelter format, the entity is already set up, representing the fastest option to startup in Mexico. However, you will share the same entity among all of the companies under the “umbrella.” This may put you at risk if one of these companies lack compliance. Ultimately it will impact all companies linked to this entity. On the other hand, a Dedicated Shelter creates a new entity for each specific project to ensure that the compliance is in full control under a single structure.
Understanding the benefits and risks associated with operating in both formats will help you prevent potential, risky, or uncomfortable situations and other issues for your operations.
Both formats (Multitenant and Dedicated) have different benefits. It is important to do proper due diligence and identify the most critical items of the project: target dates, corporate tax strategy, location, etc. This will allow you to define which shelter format supports your project and timeline.
In both shelter formats, the Mexican entity belongs to the Shelter Operator. This eliminates the liability and legal exposure to the manufacturing company. Therefore a Shelter Operator must generate total peace of mind for the manufacturing company. They are ultimately responsible for the Mexican entity´s legal compliance of all applicable regulations related to Accounting, Finance, Human Resources, International Trade, Environmental Health & Safety.
The Shelter Operator, as the Mexican entity´s owner, must have in their best interest to always be up to date on any changes in the Mexican law or other topics that may impact the way of doing business in Mexico. This is why a Shelter Operator acts as a consultant or an integral facilitator.
In our next publication, we will further explain the important recent changes applied to the Shelter structures. Also, how this impacts the taxation rules for current and new operations.
Additionally, we will explain the importance of having a clear exit strategy either if you are about to start a Shelter operation in Mexico or have been operating already under this structure for some time. This will be of critical importance as it will help you adjust your corporate plan and achieve business continuity.
Prodensa is a professional services firm with 35 years of experience and has supported more than 700 manufacturing companies with Startup or Shelter solutions in Mexico.
Learn more about our shelter operations solutions.