LLC – Limited Liability Company, is a form of a private limited company! As the name suggests, the great advantage of this kind of corporate structure in the US is the protection it offers to its members, limiting the financial risk of the operation to the assets of the company and avoiding that risk to reach the personal assets of the partner(s), in addition to other legal and tax advantages.

LLCs are widely used by foreigners who acquire real estate in the US for the advantages that this type of company brings to the investment. However, the mere fact of acquiring property through an LLC does not guarantee the desired tax or protection advantages if the corporate structuring and accounting treatment fail to comply with certain criteria and procedures, which we will comment on in this article.

Can a NON-US person establish an LLC in the US?

Yes.

Can a foreign owned LLC (NON-US Owned) maintain business in the US, such as buying and selling real estate?

Yes.

Can an LLC buying property in the US help a non-American person get the Green Card?

No! Except in a few limited situations.

What does American law mean as a foreign person?

A foreign person may be any individual, company, association, corporation or property that is not a citizen or resident of the United States or incorporated in the United States.

Advantages of LLC over Corps

The two most common forms of incorporation in the US are: LCC (Limited Liability Company) and Corp (Corporation). One of the main differences between the two is the way in which they are taxed. Clients frequently ask what is the best modality or corporate structure to acquire a property in the USA. The answer is “It Depends!”

It depends on the unique needs and unique circumstances of each client and business.

A foreign-owned LLC is taxed at the member level (Individuals) every time it sells a property or earns income from its activities. Corp., for its part, is taxed at the company level. In addition, Corp generates two levels of taxation (double taxation), one at the company level and another at the member level, when dividends are distributed.

In LLC mode, the collection of taxes is done directly in the figure of the partners. It is the so-called “pass-through” taxation, where legal personality is disregarded for tax purposes. In this way, the double taxation in the LLC does not exist, because the income is not taxed in the corporate sphere first, in a second moment, to be taxed again in the individual sphere. It is important to note that this rule does not apply if the LLC is owned by another company in the Corp type or if it is assigned the same tax treatment of a Corp, at the option of the
managers.

By 2017, LLCs were not even required to report income at the company level, only at the partner level. Recently, the US Treasury has required LLCs owned by a single foreign person to report certain information through form 5472 (Learn more about form 5472 in this article).

Inheritance tax

Foreigners are also subject to the so-called Succession Tax, whose rate is considerably higher than that applied to Americans. This is a federal tax, the rate of which is approximately 40% of the value of the asset on the day of the death of the non-US owner (an additional state fee may still apply).

It should also be noted that this year’s inheritance tax does not apply to assets with a value of less than USD 60,000 (sixty thousand dollars) in the case of foreigners and, in the case of Americans, this limit is approximately USD 11 million (eleven million dollars).