Non-resident alien wanting to invest in USA

[Sei-Jung Park]

Hi BP,

I'm a Korean citizen living in Korea looking to invest in real estate in Washington State (not DC). It looks like forming an LLC is the first step to take, so one can open a bank account and transfer funds. I already have a bank account in the U.S. - is it still best to invest through an LLC rather than personally? If so, is it necessary to go through an attorney? I read through this webpage: http://www.wikihow.com/Form-an-LLC-in-Washington-S... and there's no mention of one. Would love to chat with those that have gone through this process!

[Sebastien Hitier]

Hi @Sei-jung Park, 

I know this is a bit late to post an answer but there are important fiscal consequences to this:

1. you can either invest in real estate directly (as yourself or as a disregarded entity such as an LLC for additional liability protection) then you will need to file for an income tax in the US. The tax rate is low in the US. This is a good option for residents of a country with a territorial tax base. However, it seems to me that Koreans are taxed on their worldwide income, so you may need to declare that income again in Korea and talk to a Korea-US tax expert to see how the treaty to avoid double taxation is enforced.
2. the alternative is to invest through an LLC and elect to make that company fiscally opaque. Then the company will file tax in the US and be taxed on its net profit. You will also be taxed by US 15% by the US given the taxation treaty on any dividend distribution, and 12% on any interest you pay yourself from lending the initial funds to the company.

It seems to me that a tax specialist you consult with should tell you about these 2 options, and explain to you whether you should loan the initial capital to the LLC, as it seems to me that it could alleviate the concern of double taxation of (1) profit and (2) dividend.

You can PM me so we can share what material we have on offshore taxation.