• According to the IRS ( Internal Revenue Service), every nonresident alien who operated a business or trade in the U.S. or who earned income from the U.S. must file and pay taxes.

• FIRPTA is the Foreign Investment in Real Property Tax Act, a law that ensures the government and the IRS that nonresident aliens pay their fair share of tax on income or gains generated by the sale of real estate. Under FIRPTA, the property buyer or escrow agent is responsible for withholding 15% of the total value of the property sale. Once the escrow agent sends the money to the IRS, it will be held until the seller files their tax return (https://www.irs.gov/individuals/international-taxpayers/firpta-withholding). 
• While most of the time the determination of the foreign status of a seller is clear, there are times when this status is not quite so obvious.  This is often the case when the seller is a limited liability company (LLC) formed in the US.

• Limited liability company with one owner (known as a single-member LLC)

A single-member LLC is a legitimate legal entity, but defaults to being disregarded for purposes of US income tax reporting.  Any US income tax reporting is done in the name of the owner, not the name of the LLC.  For example, if a foreign individual is the only owner of a US LLC, the US income tax reporting is done in the name of the foreign individual.  In this situation, the FIRPTA withholding rules would apply as the seller for purposes of FIRPTA is the foreign individual, not the US LLC.  The same would hold true if the single owner was a foreign corporation.

• Limited liability company with more than one owner

A US LLC with more than one owner defaults to being taxed as a partnership for US income tax reporting purposes.  The withholding rules under FIRPTA do not apply to US LLCs taxed as partnerships as this does not fall under the definition of a foreign seller.  There are other withholding rules that apply in this situation (withholding rules pertaining to partnerships with foreign partners), but this withholding is done at the LLC level, not at the level of the sale of the US real estate owned by the LLC taxed as a partnership.

• Why form an LLC for real estate investment in the US?

Like any investment, real estate has risk and also a high cost of tax, an LLC for real estate investment in the US is the best option for non-residents. The main benefits of forming an LLC for real estate investment are: 

• Limited liability: in case there is a lawsuit against the business, the owner's personal assets will not be at risk, for these purposes only the assets that are under the name of the LLC will be legally considered.
• Double taxation: they will avoid double taxation because LLCs allow "passing through taxes", this means that you will have to pay tax once.

• Why form an LLC for real estate investment in the US?

Like any investment, real estate has risk and also a high cost of tax, an LLC for real estate investment in the US is the best option for non-residents. The main benefits of forming an LLC for real estate investment are: 

• Limited liability: in case there is a lawsuit against the business, the owner's personal assets will not be at risk, for these purposes only the assets that are under the name of the LLC will be legally considered.
• Double taxation: they will avoid double taxation because LLCs allow "passing through taxes", this means that you will have to pay tax once.