How Foreign Investors Can set up a Company in the United States
By Garrett Sutton
Posted: 16th March 2016 10:58
Sutton Law Center and its affiliate Corporate Direct work with foreign individuals, trusts and companies that want to invest in the United States. The U.S. is a big market with many opportunities. Our doors are open for foreign investors.
In most cases, the entity you use to protect your U.S. assets will be determined by your home country’s tax system. For example, Canadians find that U.S. limited partnerships (versus LLCs or C corporations) work best and match up well with Canada’s tax system. On the other hand, Australians use U.S. LLCs when investing their Superannuation Funds (retirement monies) into American real estate.
The key is to work with your local accountant to determine which is the best way, given your home country’s tax regime, to invest in the U.S. We will follow their lead and set up the correct protective entity here in America.
While foreign individuals, trusts and companies are free to invest in U.S. assets, given that we are a litigious society, an entity (be it an LLC, LP or even a C Corporation) is always suggested. Owning assets in your individual name can lead to unlimited personal liability. Please also know that foreign investors living outside the USA cannot own stock in an S Corporation. However, the S Corporation is the only restricted entity when it comes to foreign ownership.
Can foreign individuals own American LLCs? Can U.S. companies have LLC foreign members?
Yes, while foreign individuals cannot be owners of S Corporations, they most certainly can be owners of an LLC (or C Corporation.) In fact, most investors from outside the United States utilise the LLC for their real estate investments.
Is a separate LLC required for each property or asset?
That is a judgment call on your part. Segregating assets between several LLCs is always a good idea. If you have an LLC owning nine properties and a tenant sued over a problem at one property they could reach the equity in all nine properties. Many of our foreign clients hold each property in a separate LLC for the best protection.
Where should we set up our entities?
You can form an entity in all 50 states. In most situations, you will form an LLC in the state where the property is located. One or more of these in-state LLCs will then be held by a parent LLC based in Nevada or Wyoming, both of which offer superior asset protection. Graphically, supposing one property is in Ohio and one is in Texas, the structure would appear as:
Why do investors prefer Wyoming instead of Nevada?
While both states offer strong charging order protection, Wyoming offers two advantages over Nevada. First, Wyoming is more affordable. On an annual basis, the Wyoming state fee is only $50.00, compared to $350.00 a year in Nevada. Secondly, Wyoming does not list owner names on the internet (which Nevada does). You have more privacy with a Wyoming LLC. We maintain complete offices in both Wyoming and Nevada.
What is the best entity for real estate investors?
In general, the best entity for both U.S. and foreign real estate investors is the limited liability company (or LLC). The LLC offers the benefits of both asset protection and flow through taxation. LLCs are affordable to set up and maintain and are the entity choice for real estate investors. In some cases, Canadians will use an LLC taxed as a C Corporation to match up U.S. taxation with Canadian taxation. Again, it’s worth consulting your home country’s tax system.
Do you arrange for Individual Tax Identification numbers (ITINs)?
We do not obtain Individual Tax Identification numbers (or ITINs) for our clients. We have found that when filing the first LLC tax return the Internal Revenue Service (IRS) will then issue an ITIN, which is the easiest route to obtain one.
How long does it take to set up an LLC?
Allow at least a month for the whole process to be completed. Nevada has an expedite service whereby an LLC can be set up in a matter of hours. Wyoming takes about 10 days for a formation. It is best to allow for three to four weeks for the complete process (including tailored document preparation) to be finalised.
What about U.S. bank accounts?
It has become fairly difficult for foreign investors to set up a U.S. bank account. You have several options. You can work with a US bank in your home country and see if they will set up a United States based LLC or corporate account (not all will). Or you can see if a bank in your home country will allow you to set up an account for your U.S. LLC or corporation (many will). Finally, you can travel to the U.S. and open an account in person.
Can I set up a U.S. management company to manage my U.S. LLCs and LPs?
Yes, many of our foreign and American clients will set up a separate U.S. management company to manage their activities. This company can be a C Corporation or LLC, depending upon your situation.
Do I need a US address?
You need a registered agent in each state you form in and qualify to do business in. This is your US address for entity purposes. We offer this service in all 50 states for just $125 per year. If you need mail forwarded to you in your home country we can also provide this service. Call 1-800-600-1760 or 1-775-782-2201 to learn more.
Can you provide privacy?
Yes. Wyoming offers excellent privacy and does not list the managers or members on the internet. If you want to use a Nevada entity we can provide a nominee officer or manager for $650.00 per year.
What does your firm provide to those who set up an LLC or Corporation?
We file the articles, prepare the operating agreement, minutes and membership certificates, and provide you with a complete package for safely investing in the USA. Please request our free incorporation package from Corporate Direct by filling out the form here.
Sutton Law Center will work with you and your advisors to set up the right entity. We have experienced staff members who speak Spanish. We can also refer you to experienced chartered accountants to assist you with U.S. tax filings. Our formation fees are very affordable. For $695 (plus state filing fees) we will provide you with a complete LLC and/or corporate formation including all necessary governing documents.
Garrett Sutton is a corporate attorney, asset protection expert and best-selling author. Garrett graduated from the University of California, Berkeley in 1975 and from Hastings College of the Law, the University of California’s law school in San Francisco, in 1978. Garrett is the founder of Sutton Law Center, PC (www.sutlaw.com) and Corporate Direct, Inc. (www.corporatedirect.com).
Garrett is the author of Start Your Own Corporation, Loopholes of Real Estate and seven other books. For foreign investors looking to purchase U.S. real estate the book Loopholes of Real Estate is suggested reading.
Garrett and his family reside and work in Reno, Nevada. Garrett serves on the board of the Nevada Museum of Art and Sierra Kids Foundation, both based in Reno, and he is on the board of the American Baseball Foundation in Birmingham, Alabama.
For nearly 30 years Garrett has assisted more than 10,000 clients from all over the world. Garrett’s law practice and incorporating company are focused on assisting entrepreneurs and real estate investors in protecting their assets and maximising their financial goals.
Garrett can be contacted on + 775-824-0300 or by email at firstname.lastname@example.org