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SHOULD YOU BUY IN YOUR OWN NAME OR IN THE NAME OF A COMPANY?

     Over the last decade, limited liability companies (LLCs) have become the preferred form of company to acquire real estate in the United States. Despite the benefits that an LLC offers, it is not necessarily the best way to acquire real estate for everyone. For many investors, the cost of forming and maintaining a company in the face of the uncertain possibility of a lawsuit is not worth it.

BENEFITS OF BUYING THROUGH AN LLC

  • Protects the owner from possible lawsuits related to the property. That is, in the event of a lawsuit, they can only go against that property and not against your other property or personal assets.
  • Allows you to deduct the expenses generated by the property.
  • It allows owners to avoid double taxation both on income generated by rental and on the revaluation of the property. Therefore, the profits generated will be “paid” only by the LLC and not in the distribution of those profits to the owners.
  • It avoids or reduces inheritance taxes, therefore, when the owner of the company dies, the legal entity never dies, thus reducing the amount of inheritance tax.
  • If the LLC is made up of a single member (single-member LLC), it could deduct the interest on the mortgage loan.  
  • LLCs typically pay a lower registration and maintenance fee than other types of corporations.
  • Unlike other types of corporations, as a non-resident foreigner you can form an LLC.

Great flexibility in the distribution of profits

SHOULD I OPEN AN LLC FOR EACH PROPERTY?

     The greatest protection can be obtained through the formation of an LLC for each property. In this way, the investor limits legal liability to each of the properties. If multiple properties are under the same LLC, the liability of one property could expose the other properties. Conversely, if each LLC owns one property, the maximum liability will be subject only to that property.
However, due to the costs of opening, managing and maintaining multiple LLCs, it is common for investors to maintain multiple properties under a single LLC. 

ESTIMATED COSTS OF AN LLC.

  • Approximate opening cost between $400-$700
  • Annual renewal cost ranges from approximately $200 (Florida) to $400 (Delaware). 
  • Accountant fees for administration and annual tax return (before May 1st while Delaware before June 1st) depend on the service and structure requested by each client.

WHAT DOES IT NEED TO OPEN AN LLC?

  • Register name.
  • Mailing address in the United States.
  • Names of shareholders. (They can be wife and husband).
  • Prepare the company’s articles of incorporation (work of the accountant).
  • Prepare operating agreement (accountant’s work).

HOW LONG DOES THE OPENING PROCESS TAKE?

The process takes between 3-5 business days in Florida and 5-7 business days in Delaware.

Florida LLC vs. Delaware
The fundamental difference between the two is privacy.

  • In Florida it is public record
  • In Delaware information is private.

I PURCHASED IN A PERSONAL NAME, CAN I TRANSFER IT TO AN LLC?

     It is important that you plan for this before making the transaction; However, if you have already purchased in a personal name, although it is possible to transfer ownership, it is important that you consult with an accountant and/or lawyer to analyze your specific case and determine the possible legal and financial implications. Among them it is important to determine:

  • If FIRPTA applies (foreign investors).
  • Transfer costs.
  • If taken as a sale.


LEGAL NOTE:  These provisions are complicated and require the experience of a public accountant and/or real estate attorney to evaluate the potential legal and tax implications. At no time should this information be taken as advice.

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