LLC with a foreign investor

  • Creator
    Topic
  • #1638919
    titoav15
    Participant

    Hi Guys,

    I have been reading up on a question that I would like to confirm here… if a foreign investor (Realestate property) created an llc, whitch they can, they would need to get a TIN number to do a tax return. And they would be taxed at 30% vs 15.2 and 2.9 if they were a resident?

    Any benefits if they make a corporation instead?

    Thanks for you input!!

    BEC: 5/21/14 82! PASSED HALF WAY THERE!
    FAR: 4/2/15 80! Almost there!
    AUD: 69, 74, 4/3/14 81! PASSED
    REG: TBD

Viewing 6 replies - 1 through 6 (of 6 total)
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  • #1638970
    TommyTheCat
    Participant

    They would still need to get a TIN for the corporation, and incorporating could be more expensive, as a) cost of incorporating and yearly maintenance of the corp is higher than the LLC, b) 2 levels of taxation if the property is generating substantial US income potentially, depending on the underlying residency status of the foreign person and their other US business dealings.

    An s-corp is off the table as foreign persons cannot be shareholders in an s-corp, so you can't mitigate the 2 level tax issue by that route.

    Also if the entity incorporated, they'd still be required to disclose the 25% or greater foreign owner by way of Form 5472, which would keep the foreign individual shareholder on the IRS' radar either way.

    #1638982
    Wannafree
    Participant

    @TommyTheCat ,which book normally practitioners refer for their reference (Tax )?

    #1638988
    David
    Participant

    @titoav15 where is the foreign investor located? LLC's can be big trouble for foreign residents, particularly in Canada. Canada does not recognize LLCs as flow through entities and treat them as corporations. Therefore they are taxed on DISTRIBUTIONS, not on flow through income (like business income, rental etc). This can lead to a mismatch of foreign tax credits and likely double taxation.

    In my experience it is NOT a good idea for foreign individuals to invest in LLCs. LPs or C corps are the preferred method.

    EDIT: The investor would need a TIN to file a US return regardless. You can apply for one with a W-7.

    #1639003
    titoav15
    Participant

    Thanks for the replies everyone, great wealth of information here! The foreign investor would be from China. Looking to invest into some rental properties in USA. Would a C-corp or LLC would be more appropriate? His share would be over 25% as he would be the majority stakeholder.

    BEC: 5/21/14 82! PASSED HALF WAY THERE!
    FAR: 4/2/15 80! Almost there!
    AUD: 69, 74, 4/3/14 81! PASSED
    REG: TBD

    #1639279
    titoav15
    Participant

    Edit to the prior post- the investor is from Hong Kong and I know that will make a difference regulation wise.

    BEC: 5/21/14 82! PASSED HALF WAY THERE!
    FAR: 4/2/15 80! Almost there!
    AUD: 69, 74, 4/3/14 81! PASSED
    REG: TBD

    #1639288
    Bourne
    Participant

    .

Viewing 6 replies - 1 through 6 (of 6 total)
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