Why Investing In US Real Estate Without An LLC Is A Mistake, Especially For Foreign Investors

Here are 5 key reasons why working with an LLC is not a recommendation, but a necessity.

1️⃣ Asset Protection – Protecting Personal Assets

When we use an LLC to purchase properties, we create a clear separation between our personal assets and liabilities and the business activity conducted through the company.

Think of the company as a box of apples:
All the apples inside the box do not touch the apples outside. If one apple inside the box goes bad, it does not infect the apples outside.

In other words, each LLC is a separate legal compartment.

If something happens within the company:

• A lawsuit

• A debt

• A tenant issue

• Any legal event

It is handled only at the company level, within the limits of that company’s assets and activity. It does not reach your personal bank account, private assets, other investments, or additional business activities.

This is the true meaning of asset protection—not immunity from problems, but isolation of them.

2️⃣ Proper Accounting – Deductible Expenses and Loss Offsetting

An LLC allows for:

• Organized bookkeeping

• Recognition of deductible expenses such as interest, management, maintenance, travel, and professional services

• Offsetting losses and carrying them forward to future years, subject to the law

Without an LLC, reporting becomes complicated, the margin for error increases, and in most cases the overall cost ends up being higher.

3️⃣ Leverage Capability – A Weak Point for Foreign Investors

As non-U.S. citizens, our ability to leverage is very limited without an LLC.

Banks, private lenders, and financing institutions prefer working with a U.S. entity, analyze cash flow through a company bank account, and require a clear and transparent structure.

An LLC is a basic requirement in order to:

• Obtain financing

• Refinance

• Grow beyond a single deal

4️⃣ Banking

A non-U.S. citizen who is not physically present in the U.S. cannot open a U.S. bank account in their personal name remotely.

The only practical way to manage a U.S. bank account, cards, payments, and proper financial operations is through a U.S. company—an LLC.

We open a business bank account for the company and manage it remotely.

5️⃣ FIRPTA Tax – Withholding Tax on Property Sale

FIRPTA stands for Foreign Investment in Real Property Tax Act.

When a foreign investor sells U.S. real estate, a 15% withholding tax is deducted at the source—from the gross sale price, not from the profit.

This tax also applies to LLCs owned by a single foreign investor.

The structural advantage is that LLCs defined as partnerships do not always require the same 15% withholding on the sale amount, making the process smarter and more flexible, subject to proper structure and reporting.

Summary

A good investment can turn into an expensive problem if the structure is wrong.

A proper structure does not eliminate taxation—but it controls it, isolates risks, and prevents mistakes that are very difficult to fix retroactively.