Are you thinking of investing in the US? Of buying properties in the US? Of setting up a new business? Here are some considerations and steps to keep in mind:
1. Setting up an LLC or Corporation: Most states, such as Florida, require you to set up a company in that specific state if you are going to do business there. This includes if you are going to rent your property or multiple properties more than once in a while. So what are your options as a foreign investor? The first thing to understand is that you can have the option to be taxed as a partnership or as a C-Corp. This option exists with an LLC. If you pick to become a corporation, you will automatically be taxed as a C-Corp and undergo double taxation. The most favorable status and legal form for the business of foreign investors will be an LLC taxed as a partnership. In short, what will be the advantages:
- corporate veil protection from liability;
- easier management and operations than a corporation;
- no double taxation.
The key element of an LLC is the operating agreement so make sure it reflects your intentions, protects you from creditors and that voting rights are set up as you wish for them to be (majority of the members v. majority ownership interest, etc.). The operating agreement is a private agreement and does not have to be filed with the State. Your company will also have to file annual reports every year with the State.
2. Title in the property: If you are purchasing property, you will want to set up your LLC before you actually buy the property so title is directly in the LLC's name. Something to note is that if you use the property, you should pay the LLC reasonable rent.
3. Bank accounts: Your bank account options will vary. You will have the option of going with a bigger bank and/or a smaller bank with more personalized services. Note, however, that some banks do not accept many foreign investors if they do not have residency in the US. You will also want to analyze the different amenities online on their portal and their fees associated with it.
4. Taxation: You may wonder how will taxes be handled. The company will withold taxes for the foreign members and pay the taxes on their behalf. For this reason, it's important to have an accountant who understands the interplay of different countries' taxations and international tax treaties.
5. Property management: If you plan on receiving a fee for collecting rent or managing the property, you may have to be a salaried employee of the company or be a broker - this depends on the state. For example, in Florida you would have to use a management property company, broker or be a salaried employee of the company. Otherwise, you would not be able to collect a fee for it. The downside of being a salaried employee is that the company will have to process payroll, pay employer taxes and you will pay employee taxes.
Please let us know if you have any questions or concerns - we are here to help! Call us at 239-963-6943
*This article is intended as general information and is not legal advice. It also does not create any legal relationship or privileges. Every situation requires individual attention so please feel free to call us so we can analyze yours.
