7 Reasons to Buy Property in USA With a LLCJanuary 15, 2016
Limited Liability Companies Explained
Australians property investors who are buying American houses for sale are taking advantage of US Limited Liability Companies or LLCs as the ownership entity. The LLC structure is unique to the USA and is not comparable to the PTY LTD business structure common to Australia.
Active real estate USA investors understand that in order to plan for success and maximize returns, you have to pay attention to how you structure your real estate investment business. This includes the type of entity that you choose to own your US investment property.
Smart American real estate investors choose the LLC structure to own their US property portfolios. Here are seven reasons why;
1) There is no liability of members
- In a LLC, the individual owner or partners are called members.
- In a Limited Partnership, the General Partner has liability for the obligations of the Limited Partnership.
- In a General Partnership, all of the partners have liability.
- In a Corporation, there is not liability for shareholders or officers under most circumstances.
2) A LLC is a “flow through’ entity for Federal Income Tax purposes
- This means that income is taxed at the member level, not the entity or LLC level
- For example, if the LLC makes $100,000 of income and there are 10 equal members, each member is taxed for $10,000 at their personal income levels.
- This means that there is no tax at the LLC level.
3) There is flexibility in the structure of the management of the company
- There are unlimited options to structure LLC company management with a customized operating agreement.
- Corporations have more rigid statutory guidelines for management.
4) There is flexibility in structuring the relationships among the members
- For example: Requirements for the sale of units to non-members, the ability to remove members, the ability to remove or change management, and requirements for the ability to sell assets.
5) A LLC is not taxed twice like a corporation
- For example, if the LLC had $100,000 of income, the members would receive $100,000 and pay tax on their income.
- If a corporation has $100,000 of income, the company would pay $25,000 in tax and the shareholders would receive $75,000 and pay tax on their income.
6) Flow through losses and depreciation
- If the LLC owns real estate, then depreciation of the asset and any losses, including non-cash losses, are passed thought to the members personal income tax (benefit).
7) Non residents / US citizens are allowed to legally operate LLCs
- The United Stated does not restrict foreign ownership of LLCs
- Australians who own US property are required to file a US tax return for the LLC.
America Property Source works with USA real estate investors who take an active roll in creating their financial future. Owning investment property is a business and businesses have to be operated in a company structure. Always protect your investment interest and seek to maximize the legitimate tax benefits from owning USA real estate.