Are you an individual or a legal entity? Quick guide for entrepreneurs

Are you an individual or a legal entity? Quick guide for entrepreneurs

Jan 28, 2025

Individual

for Jessica Ramirez

Jan 28, 2025

When starting a business, one of the first steps is to define whether you will operate as an individual or a corporation. This choice affects tax, legal, and administrative aspects, so it is essential to understand their differences to make the best decision.

What is an individual?

An individual is any person who engages in economic activities on their own account. They can offer products or services, register in the Tax Incorporation Regime (RIF) or as a self-employed professional and have tax obligations based on their income.

Real example:

Mariana is a graphic designer and works independently. To issue invoices to her clients and pay taxes, she registers as an individual with business activity. This allows her to deduct expenses related to her work, such as design software and computing equipment.

What is a corporation?

A corporation is an entity formed by one or more people who create a society with a common purpose. It can be a company, civil association, or cooperative. It has distinct tax obligations and benefits, such as the possibility of obtaining credits or attracting investors.

Real example:

Carlos and Sofía founded a digital marketing agency. To gain better business opportunities, they decide to establish themselves as a public limited company (S.A. de C.V.). As a corporation, they can hire employees, sign contracts, and expand their business more easily.

Key differences between individual and corporation

Which suits you?

If you're starting alone, the individual figure may be the best option. It offers a simple structure, fewer accounting requirements, and a tax burden adjusted to income. Additionally, it is an excellent alternative if you do not plan to have partners or employees in the short term.

On the other hand, if you plan to expand your business, work with investors, or protect your personal assets, it is advisable to establish yourself as a corporation. This figure allows for greater credibility with clients and suppliers, access to financing, and a legal structure that facilitates business organization. Moreover, it has the advantage that the liability of the partners is limited to the capital contributed.

How to register with the SAT

The registration process with the Tax Administration Service (SAT) varies depending on the figure chosen:

Registration as an individual

  1. Visit the SAT portal and schedule an appointment at a nearby office.

  2. Bring your CURP, proof of address, official identification, and an email address.

  3. Request your Federal Taxpayer Registry (RFC) and select the appropriate tax regime according to your economic activity.

  4. Obtain your Electronic Signature (e.firma) and password to access SAT services.

  5. Once registered, you will be able to issue invoices and comply with your tax obligations.

Registration as a corporation

  1. Define the type of society you wish to constitute (S.A., S. de R.L., etc.).

  2. Go to a public notary to draft the articles of incorporation of the company.

  3. Register your society with the Public Registry of Commerce.

  4. Obtain the company's RFC at the SAT, bringing the articles of incorporation, proof of address, official identification of the partners, and e.firma.

  5. Register your company with the Mexican Social Security Institute (IMSS) if you will hire employees.

  6. Comply with tax obligations, including the filing of periodic declarations.

Conclusion

Choosing between individual or corporation depends on your plans and needs. If you still have doubts, at Cretia we help you manage your business easily. Register today at cretia.app and access tools that will facilitate your entrepreneurial growth!

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Schedule a demo today or create your account.

Schedule a personalized demo and discover how Cretia simplifies the management of your business. Or create your account and start exploring our features right away.

Schedule a demo today or create your account.

Schedule a personalized demo and discover how Cretia simplifies the management of your business. Or create your account and start exploring our features right away.