Investing in the USA from another country how do I structure?

Question

Hey,

I own a real estate investment agency in upstate New York. I have been approached by a few people that are citizens of Canada that want to invest in the USA. They want my help to invest here but I do not know if there are any legal issues that can arise being that they are not United States citizens. Can they purchase property here on their own? Can you have a buisness partnership with one partner being in the USA and one being in Canada and have the LLC structured in the USA?

Any help on this topic will be greatly appreciated!

Thank you in advance!

-Joshua

Basit Siddiqi · Answer

@Joshua BrodnickiForeigners can invest in the US but there are some things to consider.Is the income earned considered FDAP(Fixed, Determinable, Annual, Periodic) or ECI(Effectively Connected Income).There may be withholding requirements if the income is considered FDAP or ECI.The sale of real estate may result in compliance with FIRPTA.You may need to look to see if there is a treaty between the US and the foreign country for preferred tax treatment.The foreign investor may need to apply for an EIN.You may want to utilize a structure with a US corporation.Make sure to work with someone who understands US taxation as it pertains to foreign investors.

Tola Kehinde · Answer

I am a Canadian actively investing in the US.the most tax efficient structure is investing through a Partnership.I understand that every situation is unique. Therefore will reccomend a consult with a professional Cross border CPA for advice.

Kory Reynolds · Answer

A common structure used is a "blocker" US C-corp. This saves some headaches. They own the CCorp which then owns the properties. Then no one has to deal with annual flow through taxation headaches on either side of the border. When earnings are paid out of the CCorp, it would be as a dividend, and subject to withholding.

Of course then you have double taxation considerations, but with the handful of clients I have dabbled in that run this structure, their income levels are such that the double taxation won't matter much. Certainly no expert, I have just helped out another manager with some of the partnership issues involved, I won't pretend to be an expert on the foreign side of things.

Lance Lvovsky · Answer

@Joshua Brodnicki

It is possible. From a tax perspective, there may be additional filing requirements such as partnership withholding forms and the Canadian investor having to file annual income tax returns as well. It would be ideal for you/them to have a CPA who can provide guidance on tax issues.

Investing in the USA from another country how do I structure?

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