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Australian company/trust buying properties in USA

Posted on: 18/10/2011
Posted at: 06:39:55
Hi, We are a group of Australian citizen and have formed a group (trust) to allow us to buy properties in the USA without borrowing any money. We would like some information regarding property investments in the USA. So far I have been advised that I need a company in the USA. My questions are: 1. What is the benefit of opening up a company in Delaware (It seems that Delaware is somehow a preferred state) 2. What are the tax laws when it comes to rental returns and capital gains tax. 3. Do I need to pay double tax in the USA; Once for the company and then individual share holders of the company. 4. Can an LLC in say Delaware be owned by a foreign company (in this case Australia).

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Posted on: 22/10/2011
Posted at: 16:19:06
Several things to look at. You will need to set up a regular corp. for the company. The corp will hold LLC's which will own the rental properties. One LLC for each property, LLC is a pass through for tax. Best two locations for the corp now are either Wyoming or Delaware. Deferences are a personal choice each has an advantage. As a US resident I would use Wyoming as a non resident I would use Delaware. The LLC's can be formed in the same state as the corp. but will have to be all so registered DBA in the state were the property is located. You will be subjected to state property tax, and income tax for the location of the properties, as well as income tax to the IRS on the corp income from the LLC. The hard part is which states and type of property you want and choosing a good management company and accountant to take care of those things.

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Posted on: 23/10/2011
Posted at: 23:56:39
Why form a corp? Can't the overseas (Australian) trust own the US LLC? The properties are located in Illinois and I have also engaged a good management company.

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Posted on: 24/10/2011
Posted at: 17:12:16
Single owner LLC's can have their Veil-Pierced here in the US. Putting another layer between the Trust and LLC would be helpful, all so a LLC for each property is a must. Rental property just has to much liability and regulation in the US, a lot of law suits. States, Counties and Cities are looking for more review, Illinois is way at the top. Cash is king, so the deals are there, so is the prophet. You said you had a good management company. Have them recommend a couple different tax accountants and attorney's that understand that a foreign trust will be the owner. Interview, due diligence. That way formation can be set up right. A little more cost up front by not using a boiler plate firm but cheap insurance in the long rung for the amount of money you will be investing. Good luck, I like the plan.

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Posted on: 09/11/2011
Posted at: 02:25:09
Disclaimer: I am neither an attorney nor a tax professional. Delaware is unique in that its Court of Chancery handles only business matters. Other states have courts that handle a mix of everything. Additionally, Delaware has a reputation for being management-friendly. The short answer is that, yes, you will need to pay "double tax" if you use a C-corporation. Foreigners cannot be owners in S-corporations, so any corporation for this project would inherently be a C-corp. Veil piercing is a complex subject. Different states have different criteria for what could result in veil piercing. I recommend the works of Bromberg and Ribstein (full disclosure: I have no connection to them) for more information about LLC legalities. I've heard of LLCs being jointly owned by an entity and a grantor trust [settled by same entity]... thus being multi-owner from a legal standpoint, but single-owner from a tax perspective. Again, I'd be out of my league if I tried to give specific advice. Keep in mind that certain states -- Delaware being a prime example -- recognize LLCs largely as "creatures of contract", affording members both the privilege and the responsibility of playing legislator when drafting the entity's internal workings. Read statutes. Read academic papers. Then seek competent accounting and legal counsel.

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