How are partnerships taxed?

Partnerships are taxed the same as corporations. Federal law imposes that all entities legally considered to be ‘moral persons’ are taxed based on Income Tax Law and Value Added Tax Law. These taxes are paid annually, at the end of the fiscal year. State and local governments generally impose taxes on real property and some states levy taxes on salaries and wages, generally paid by the employer. Partners pay income tax based on the dividends they receive. The Value Added Tax Law generally benefits the partnership, since these taxes are often returned, as the partnership is not usually the last consumer and it is the last consumer who pays value added tax.

Mexico has adhered to approximately 60 double taxation treaties on income. A partnership is subject to tax when the main management of the business is based in Mexican territory.

Reporting and transparency requirements

To what extent must partnerships, LLPs and similar structures file accounts and other documents and information with a government agency?

All types of entities, whether corporations or partnerships, must comply with accounting norms and regulations. However, some are more strictly regulated than others. For instance, public corporations must file reports quarterly that must be transparent and audited. On the other hand, partnerships, if unlimited, are not subject to audited accounts.

One can review the public registry for documents regarding general partners’ meetings (if published) and a partnership’s formation. However, the information regarding financial or accounting conditions generally remain private, unless a specific topic has been discussed in a meeting made public.

Ownership and membership

Can anyone be a partner, and, if not, who can and cannot? Can bodies corporate or other partnerships own a partnership?

Partners must be individuals or entities who have the legal ability to trade, and must have the capacity to exercise their rights. Although it is not legally prohibited for other partnerships or corporations to be involved in a partnership, it is very rare, owing to the complication of unlimited responsibility of the partners in a partnership.

In general partnerships, all partners must respond in such a way, unlimitedly and jointly; in limited partnerships, certain partners can have unlimited responsibility, while others have limited responsibility according to the applicable law. If a person’s name appears in the partnership’s name, then he or she must respond unlimitedly and jointly, and cannot agree to a limited liability.

Execution of documents

How do partnerships and LLPs execute documents? Must all partners sign? Can the partnership or LLP sign in its own name?

Usually, partnerships will appoint a legal representative to execute documents; however, if there is no legal representative and all partners are also administrators, an administrators’ meeting will be held. In an administrators’ meeting, a decision will be made by unanimous consent or majority vote, and a delegate will then be appointed to execute the resolution in the partnership’s name. Through either of the aforementioned methods to execute documents, the partnership, and thus the partners, are legally bound to the obligations acquired.