The information provided below will help any individual who is not a resident or citizen of the United States understand what is involved when purchasing and investing in real estate in our country.

Persons who are not United States residents or citizens can own property in the United States without special permission. There are no special permits or permissions, and the purchase transaction for a non-US person is much the same as for a US person. There is some difference only in the operation (rental) of the property, and at the time of sale.

The purpose of this page is to discuss certain legal and business concepts applicable to ownership of United States real property. The information on this page is not intended to constitute legal advice. Please use this information as a tool to understand the concepts you will discuss with a United States attorney.

If you are foreign real estate buyer or investor, I encourage you to contact these two individuals prior to contracting for the purchase of a US property or business. They are available for consultation and will be able to answer any questions you may have.

For contract closing and title:

Steven Greenberg, Esq.
Icard Merrill
2033 Main St. Ste. 600
Sarasota, FL 34237
941-365-6216
Email:

For tax, visa and business related:

Troy H. Myers, Jr., Esq.
Icard Merrill
2033 Main St. Ste. 600
Sarasota, FL 34237
941-953-8110
Email:

DOING BUSINESS IN THE UNITED STATES

There are various business organizations available for doing business in the United States. These organizations are subject to both federal and state law. The advice of specialists is very important in the United States because of  the planning opportunities available. All agreements should be in writing, reviewed by an attorney before signing.

OWNING PROPERTY IN THE USA

The first consideration is the legal structure of the ownership of the property you intend to purchase. There are several options, each of which has practical and legal advantages and disadvantages. Before choosing an ownership option, examine your goals, both short and long term, and consider how each type of legal ownership applies to your goals.

Sole Proprietorship Ownership

The simplest way to own property is in your own name and it is also the least expensive the least to maintain, but it has some disadvantages. This structure consists of one or more individuals whose names are on the deed and own the property. The deed is recorded in the public records and may be examined by the general public. There is no confidentiality as to who owns the property and the purchase price that was paid. If funds were borrowed to purchase the property, a recorded mortgage will be public record.

Business expenses and income are included in the owner’s personal US income tax return. This type of ownership is less expensive for tax reporting, the business itself does not file a separate tax return. Death of an owner will require compliance with US and state probate and tax regimes. All individual owners are personally liable for the liabilities arising from ownership and operation of the property. Your personal assets can be seized to satisfy the debts and obligations from operation of the property.

You may purchase insurance and other similar measures to protect your assets.

Corporation

A corporation is a complex business structure that must be formally incorporated by filing various forms such as articles of incorporation and paying specified fees. Owners of a corporation are called stockholders or shareholders and their ownership interest in the business consists of shares of stock of the corporation. The corporation is managed by a board of directors that is elected by the shareholders and the board of directors appoints officers that manage the day-to-day affairs of the company.

Setting up the proper capital structure, including the number of shares to be authorized and issued and the number of shareholders is critical to the success of a corporation and requires professional advice and planning. The formation, governance, and operation of a corporation are subject to many rules and regulations. There are costs associated with the corporation which include accounting, tax, and legal services. The corporation has rights and obligations that are separate from the shareholders. This means that the corporation may be sued, borrow money, and enter into agreements and do all other things wholly separate from its shareholders. The corporation offers shareholders limited liability protection of personal assets if the corporation follows proper corporate form and rules. The corporation legal existence continues after death of a shareholder.

Income earned by corporations is potentially subject to a double tax, but this can be avoided. If not avoided, corporations are subject to corporate income tax at the federal and state level, and the earnings that the corporation distributes to its shareholders as dividends are also taxed at individual tax rates on the shareholders’ personal tax returns. If corporate tax is avoided, on profits, the income flows through to shareholders in the same percentage as each shareholder’s ownership interest, and each shareholder reports it on an individual return.

Limited Liability Company

An LLC offers protection from individual liability. The LLC may have owners who are not US citizens. The costs involved in forming and operating an LLC are comparable to a corporation. The owners of an LLC are called “members” and own percentages of the LLC often referred to as “units.” An LLC can be managed by a single manager or a board of managers elected by the members. The Manager or board of managers can appoint officers to manage the day-to-day affairs of the LLC. The income of an LLC is passed through to its members who report it on their personal income tax returns. The LLC does not pay taxes unless it affirmatively elects to do so. For tax purposes, a single member LLC is treated as a sole proprietorship and a multiple member LLC is treated as a partnership. The members of an LLC can allocate income and losses among themselves in any way that they agree, not necessarily based on their ownership interest.

General Partnership

A general partnership requires an agreement between two or more individuals or entities to own and operate a business. The partnership agreement should be written. Profit, loss, and management of the business may be shared equally by the partners, or a single person may be designated to manage the investment. Each partner is personally liable for the partnership’s liabilities. Individual partners report their share of profits and losses on their individual tax returns and the partnership itself does not pay taxes.

Limited Partnership

A general partner in a limited partnership has no protection from personal liability for debts of the business, but the limited partner’s liability is limited to the amount of his or her investment in the company. This enables an investor who does not take n active role in the partnership’s operation to share in the company’s profits without exposure to the company’s liabilities. A general partner is exposed to unlimited personal liability. The limited partnership is considered a separate legal entity and must file taxes (but not pay) separately. Generally, a limited partnership has pass-through taxation.

Limited Liability Partnership

A limited liability partnership is similar to that of a limited partnership, and allows all partners to take an active role in the business of the partnership while enjoying limited liability. Limited liability partnerships offer the pass-through taxation of a partnership and the limited liability of a corporation or LLC. Special tax rules may apply to non-U.S. persons that own a Limited Liability Company, Limited Partnership or General Partnership entities and accordingly.

BRIEF SUMMARY OF U.S. TAX SYSTEM

Taxation in the United States involves payments by businesses and individuals at federal, state, and local government levels. Federal income tax is levied on US source income of all persons. All individuals and businesses must file an annual income tax return.

Partnerships must file an informational return. The U.S. tax system is a “pay-as-you-go” tax which means that generally you must pay the tax as you earn or receive income during the year. The tax is a “progressive tax” because it is higher as a percentage of income for higher-income taxpayers. A business may be subject to tax in addition to tax paid by the business’ owners on their share of the business’ profits.

EMPLOYMENT TAXES AND WITHHOLDING

Federal payroll taxes are primarily collected by employers and remitted to the Internal Revenue Service (IRS). Employers collect these taxes through a system of direct withholding. Employers pay a portion of a taxpayer’s income tax directly from an employee’s payroll. The amount of taxes so withheld is based on the employee’s salary and other factors such as his or her marital status and number of dependents.

The difference between the amount withheld and the actual tax owed is either paid to the IRS or refunded by the IRS after the end of each year. Another significant tax paid by employees is the Social Security tax. Half of this tax is paid by the employee and the other half is paid by the employer. Self-employed people are responsible for both halve of the Social Security tax.

Social Security taxes are taken from wages but not from other sources of income such as interest or dividends and there are certain caps on the amount of Social Security taxes assessed. In addition, individuals are subject to Medicare taxes.

TAX TREATIES

Double Taxation Treaty There may be tax treaties that are applicable between the United States and the country of the foreign investor. Under a treaty, a resident of one state is subject to taxes according to the laws of that state. Criteria used to determine residency include substantial presence, permanent home or extended stay in a contracting state. A person who does not have a permanent residency visa or “green card” but has a substantial presence in the United States may be deemed a resident of the United States for tax purposes, although that person is NOT a resident of the United States for immigration purposes.

WORK PERMITS/VISAS

An important consideration in purchasing property or establishing a business in the U.S. is to enter and work in the US lawfully. All non-U.S. citizens or non-resident aliens must comply with visa entry requirements.

Visa Waiver

For many countries, a citizen of that country who remains in the US for less than 90 days is not required to obtain a visa. A person in the US on a Visa Waiver may not work for a US company while in the US, this requires a different type visa. Usually, a person may enter the US on a Visa Waiver two or three times a year, but perhaps not more, in the discretion of the Immigration Officer at the Port of Entry.

B-1/B-2 Visa

People who wish to stay in the US may secure a visitor’s visa (for business, B-1 – or pleasure, B-2) for short stays.

The number of times the person may enter the US, and the time the person is authorized to stay in the United States is determined by the US consulate which grants the visa, and by the immigration officer at the Port of Entry into the US. The number of times and the length of stay depends on the purpose of the trip. The B-1 visa category may be used for relatively short periods of time to set up and staff a company, however, the person cannot be paid by the U.S. company. The usual initial grant is up to 6 months, but can be extended by petition to the USCIS.

E-1/E-2 Visa

Investors of countries which have signed an investment treaty or treaty of commerce and navigation with the United States, may request an E-1 (business trader) or E-2 (business investor) category. E visas may be used by entrepreneurs who set up a business in the United States. It is generally used by an investor and his/her family. The E-1 visa is granted for business people to carry out trade with the United States.

The trade may consist of goods or services. The trade must be continuous and involve numerous transactions, and be ongoing business with revenue sufficient to support the business trader and his/her family. The E-2 visa is granted for people who make a “substantial investment” in the United States. The funds must be at risk and be committed to the investment.

The funds must be transferred to the United States and used in an active business. There is no minimum amount although most investments are over $100,000.00. In both categories (E-1 and E2) the business may be owned jointly with a spouse or partner. In order to qualify under either the E-1 or the E2 category, at least 50% of the stock of the company engaging in trade or investment in the United States must be owned by national of the country of origin of the investor. For example, 50% of the business could be owned by a Swiss citizen and the other 50% by an American citizen. The E visa (E-1 or E-2) is granted to the principal owner of a business or a key employee in an executive or a managerial capacity. The spouse and children under 21 of the E-1 or E2 visa holder also receive a visa. We advise in depth discussions with us before committing to purchase a business.

L-1 Visa

The L-1 visa is used for intra-company transfers. A person employed by a company in the foreign country may use an L-1 to establish a business in the United States. The person coming to the US must have been employed continuously for at least one year by the foreign company, and intend to perform services for the new US company.

The employee coming to the US must be an executive, a manager or have specialized knowledge regarding the products or services of the company. The period of admission is for a total of 7 years for executive and managerial positions, 5 years for employees with specialized knowledge, and 1 year for an employee who sets up a new office in the United States.

Treaty Investor

An investor may receive permanent residency under the EB-5 category if he makes an investment of at least $1million dollars (or $500,000 in certain depressed areas), the applicant must demonstrate that the investment will benefit the U.S. economy, and it must create a requisite number of full-time jobs within the United States.

Permanent Residency/Green Card

Permanent residency may be obtained through employment by a US company of an employee the company seeks to employ permanently based on employment skills. The employee must have specialized education and skills and the employer must demonstrate that it cannot find an employee with the same or similar qualifications on the local market.

In most cases the application has to be processed and approved by the Labor Department before being processed by immigration authorities. Permanent residency may also be obtained through other channels, for example through a U.S. family member or the U.S. spouse. Once the appropriate work permit has been issued the visa holder may enter and work in the U.S. lawfully.