Why foreign buyers should never use an LLC to buy U.S. real estate

Full transcript

0:10 Hello, I’m Max Dilendorf, a New York attorney and real estate advisor.

0:15 In today’s video, I want to address one of the most common and costly mistakes I see foreign investors make when purchasing U.S. real estate—buying property through a U.S.

0:28 Limited Liability Company, or LLC. At first glance, using an LLC may seem like a smart move. It offers liability protection, a degree of privacy, and is commonly used in U.S. business transactions. But for non-U.S. residents, purchasing real estate through an LLC can create serious tax exposure and legal complications that are often overlooked.

1:02 Let me explain why. First, let’s talk about tax reporting and complexity. When a nonresident holds real estate through a U.S. LLC, they are required to file annual U.S. tax returns, often using IRS Form 1040-NR [MD1.1]for reporting rental income or capital gains.

1:29 In some cases, the LLC may be treated as a U.S. trade or business, triggering what’s known as Branch Profits Tax that can result in an additional 30% tax on repatriated profits.

1:46 In contrast, owning the property directly as an individual may subject you only to the 15% FIRPTA withholding upon sale — a far simpler outcome in many cases.

2:01 Second, there is No gift tax advantage to using an LLC.

2:06 Let’s say you plan to gift the property to a family member by transferring the LLC shares.

2:14 The IRS [MD2.1]will treat that transaction as a gift of U.S.-situs real estate.

2:20 And as a nonresident, you don’t get the $14 million lifetime gift tax exemption that U.S.

2:27 citizens enjoy. In 2025, you only receive a $19,000 annual exclusion. So for a $5 million property, the federal gift tax could exceed $1.9 million. The LLC does not shield you from this liability; it just adds complexity.

2:50 Third, and perhaps most overlooked, is U.S. estate tax exposure.

2:55 If a nonresident passes away owning U.S. real estate through an LLC, the property remains within the U.S. taxable estate and is subject to U.S. tax jurisdiction.

3:10 The IRS provides only a $60,000 exemption to nonresidents, and the rest is taxed at rates up to 40%.

3:22 That means if you pass away owning a $5 million property through an LLC, your estate could face almost $2 million in federal estate taxes. Holding title through an LLC does not protect against this tax, nor does it preserve confidentiality in any meaningful way.

3:44 In fact, legal disputes can easily collapse the LLC structure, exposing ownership in court.

3:50 There’s also the matter of Ongoing compliance and Cost. LLCs require annual state filings, payment of franchise taxes, and appointment of a U.S.-based registered agent.

4:05 These obligations add administrative burden and legal expense with no offsetting benefit in most cross-border real estate ownership scenarios. If you’re a non-U.S. resident considering buying a property in the US, don’t default to using a U.S. LLC.

4:26 It may seem like a convenient structure, but in most cases, it does more harm than good.

4:33 Instead, work with legal and tax professionals who understand the nuances of international tax planning and can design a structure aligned with your goals and can develop a structure tailored to your specific goals and country of residency. The United States has tax treaties with more than 65 countries, [MD3.1]many of which can play a critical role in properly structuring your real estate acquisition to minimize tax exposure and preserve long-term flexibility.

5:04 Thank you for watching. If you found this helpful, subscribe to the channel for more legal insights on international real estate structuring, tax planning, and asset protection. See you in the next episode.

A transcript of the recording, so it reads as speech rather than as prose. It explains the law in general terms and is not advice on your own situation, which turns on facts this video cannot know.