Foreign Investors and the LLC

2 Comments to “Foreign Investors and the LLC”

  1. At first I big your pardon for my English. My native language is spanish.
    I m MBA and CPA in Argentina. Im looking for a partner in US for tax consulting.
    Some of my clients have this kind of structure, bad called offshore Llc
    US Llc
    One o more members non US tax residents
    All busines outside US
    Banking account outside US
    No employees in US
    No office in US
    No Tax ID number
    No reports to IRS
    No reports Foreign Bank Account Reporting (FBAR)
    Member dont pay Tax in US
    This structure was ok up today?
    From July 1st It should to change because de new rules of FACTA?
    Llc should to have a tax ID number to give to the Banks outside US, if not the bank will close the account. Whit a EIN ( Employer Identification Number ) although there is no one employee it will be enough for foreing bank?
    So if Llc will have a tax ID it means automatically that the members will have to pay taxes in US or not? Whit EIN?
    I ve to tell my clients the correct option
    If they ve to change the structure or go on with them your company could make the changes or the necessary adjustements. The same for new start ups
    Is it posible to know which will be the fees for the diferents options or you ll tell me that in accordance the cases we ll treat?
    Enrique Rubinstein
    Buenos Aires

  2. Megan Hughes says:

    Hi Mr. Rubinstein, thank you for reaching out to us. I have responded to you through regular email. I hope you get the message – please let me know if you don’t.

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A Limited Liability Company, or LLC, is a legal structure that provides asset protection and personal liability protection for its owners. It is available to use in all 50 states. When you hold assets in a U.S. LLC, and the LLC is sued, your personal assets held outside of the LLC are not at risk.

Additionally, if you have multiple properties you can protect them by holding them in separate LLCs.

The owners in an LLC are called members. A husband and wife can hold their membership interest separately, so that there are two members, or hold one membership interest jointly. Usually we recommend that foreign couples hold their interest as a single member interest.
There are two different types of LLCs that you may have: a member-managed LLC or a manager-managed LLC.

The following is true for a member-managed LLC:

  • Members = owners
  • All members can act for the LLC.
  • Liability protection is provided to members from lawsuits in all 50 states.
  • US tax treatment is favorable for foreign investors.
  • Assets in an LLC are pooled, so risk is spread across all assets
  • No restrictions on number or type of owners.

The operators of an LLC are called Managers. Managers in an LLC hold the same equivalent authority that the directors and officers do in a Corporation. An LLC can set up with Members only, or Members and Managers. The Manager-Managed option is preferred for flexibility and privacy.

The following is true for the Manager-Managed LLC:

  • Members = Owners
  • Managers = Operators
  • Only Managers can act for the LLC
  • Liability protection is provided to Managers and Members from lawsuits against the LLC
  • Legal in all 50 states
  • U.S. tax treatment very favorable for real estate investors
  • Assets in an LLC are pooled, so risk is spread across all assets
  • No restrictions on numbers or types of owners or Managers

The one exception is for Canadian investors into the US market. The Canadian-US Tax Treaty provisions work against Canadians in this case. We do not recommend LLCs for Canadians.