Should I buy in my own name or in the name of a company?

Over the last decade, limited liability companies (LLC) have become the preferred form of company for acquiring 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 light of the uncertain possibility of a lawsuit is not worth it.

BENEFITS OF PURCHASING THROUGH AN LLC

• Protects the owner from potential lawsuits related to the property. This means that in the event of a lawsuit, they can only go against that property and not against their other personal assets.

• Allows for the deduction of expenses generated by the property.

• Allows owners to avoid double taxation on both income generated from rent and the appreciation 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.

• Avoids or reduces estate taxes, hence, upon the death of the company owner, the legal entity never dies, thus reducing the amount of inheritance tax.

• If the LLC is formed by a single member (single-member LLC), it could deduct the interest on the mortgage loan.

• LLCs usually pay a lower registration and maintenance fee than other types of corporations.

• Unlike other types of corporations, a non-resident foreigner can form an LLC.

• Great flexibility in the distribution of profits.

SHOULD I OPEN AN LLC FOR EACH PROPERTY?

The greatest protection can be achieved by forming 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 others. Conversely, if each LLC owns one property, the maximum liability will be tied only to that property. However, due to the costs of establishing, managing, and maintaining multiple LLCs, it is common for investors to keep multiple properties under one LLC.

ESTIMATED COSTS OF AN LLC

• Opening cost approximately between $400 - $700

• Annual renewal costs range from $200 (Florida) to approximately $400 (Delaware).

• Accountant fees for administration and annual tax filing (by May 1st for Delaware before June 1st) depend on the service and structure requested by each client.

WHAT IS NEEDED TO OPEN AN LLC?

• Register name

• Mailing address in the United States (if you don’t have one, typically the accountant or attorney who creates the LLC will use their office address for this purpose)

• Names of the shareholders. (They can be husband and wife)

• Prepare the company's articles of incorporation (work of the accountant)

• Prepare the operating agreement (work of the accountant)

HOW LONG DOES THE OPENING PROCESS TAKE?

The process takes between 3-5 business days in Florida and 5 to 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, the information is private.

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

It is important to plan this before making the transaction; however, if you have already purchased in your personal name, while it is possible to transfer the property, it is vital to consult with an accountant and/or attorney to analyze your specific case and determine the potential legal and financial implications. Among them, it is important to determine:

• If FIRPTA applies (foreign investors)

• Transfer costs

• If it is considered a sale

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