Should You Use An LLC To Buy USA Property Or Your Own Name?

I have had a few investors call me this week to ask me if they should set up a company to invest in USA property. So I will share what I told them with you.

When you invest in USA property, you have two main options.

Set up an LLC.

Or the easier option.

Use your own name.

Setting up a limited liability company, which is what LLC stands for, is nothing new, many property investors go down this route rather than use their own name for reasons I will reveal later on.

So let’s look at the easy option first.

If you decide to invest in your own name all you need to do is send your passport to the lawyer so that they can register the investment in your name.

Much the same as if you happen to be a self-employed sole trader, you will need to declare your earnings in a personal tax return.

It is also wise unless you like to take charge of your own accounting, to use a good accountant to find ways to lower some of the tax you are required to pay on rental profits.

The good news is, if your country has a double taxation treaty in place with the US you can off-set against any tax you pay in your home country. Again a good accountant can help you with this.

If you need more information on how your country stands on double taxation with the US take a look here.

When it comes to selling your Florida property investment you will again be liable for capital gains tax on the profit which currently stands at 18%.

That is pretty much that when you invest in your own name.

Then we come to setting up an LLC to invest.

Setting up an LLC to Invest in property

Depending on who you talk to about this, some people will say that using your own name is best while others will tell you an LLC protects you from some of the problems you might encounter.

People even suggest that an LLC has tax advantages. Well not really.

Unfortunately the USA’s version of HMRC, (IRS) does not distinguish between LLCs or sole proprietorships  when only one person is running the company.

The liabilities and the tax you need to pay will be the same.

You will still be asked to file a tax return and pay the same 18% capital gains tax when you sell.

The only difference is the amount you will need to pay your accountant, which will inevitably be more with all the extra forms they will need to fill in.

There are also issues around offsetting tax in your home country, it may not actually be possible.

You will also need to pay close to $1,000 for the pleasure of setting up your LLC.

Yet setting up an LLC is not all bad.

You will have limited liability should things go wrong.

The USA is notorious for seeing lawsuits filed for even the slightest accidents.

Other than that it really depends on your own individual circumstances. Investors with large portfolios may see an LLC as a better option while those investing first time might prefer to take the easy route.

What is your experience of tax when investing in USA property? We would be interested to hear your thoughts.

Kind regards

Loxley McKenzie
Managine Director