Sunday, 12 August 2012

Set up an LLC (Limited Liability Company)

Once we decided that we wanted to invest in US Property, the first step we made was to set up an LLC. If you would like a description of what an LLC is then please see this LINK.

There are many different entities that you can create to purchase a property in the US, and there is nothing stopping you buying a property in your own name. There are advantages and disadvantages with every entity, however we believed an LLC suited our purpose for the following reasons:

We needed to create a separate entity to purchase the property to protect us from litigation. The last thing we wanted was to purchase a US property, only to have a tenant slip and fall and then sue us for our own personal assets. An LLC means that the only assets that can be taken in the event of a lawsuit is what the LLC owns, in this case, the property we purchase. Of course this means that we could technically lose our property in the event of severe negligence on our behalf, but it would be better than losing my personal property in Australia as well.

An LLC allows one entity to be set up to represent the two of us, because we are not investing individually, this allows a simpler transition to purchase the property, instead of having two names on everything, there is just the company name.

Setting up an LLC is relatively cheap, in all, the total cost to set up the LLC was $350, see below for a breakdown of the costs.

Overall the LLC entity is simpler and has much less paperwork compared to other entity types.
So now that we had decided to start the LLC, the next steps we had were to determine how we would set it up. You are able to set up the LLC yourself by filing forms with the IRS, I will be honest and I am not sure which forms you require as we did not do it ourselves. However to make the process easier for us, we decided to use the help of a US company to start up our LLC.

The company we used was Incorp, which specialises in the set up of LLCs. They also provide Registered Agent services for a relatively low price. It is compulsory that an LLC has a registered agent in the state that you register the LLC in. It is just to ensure that there is some address the IRS can find if they need to. The registered agent can be anyone provided they are not members of the LLC.
The following is a breakdown of the costs to set up an LLC in Florida:

Incorporation Fees - $150.00 (compulsory)
Service Fee - $99.00 (Incorp service fee)
Compliance Service - $49.00 (for 1 Year - optional)
Certificate of Good Standing - $35.00 (compulsory $5 fee with $30 service fee - optional)
2 Day Shipping - $18.00 (overnight shipping is $24)

The registered agent was free for the first year, and $99.00 every year after that. However I believe you can purchase 3 years at a discounted price of $270.00 approximately.

So the total cost to start up the LLC for us was approximately $350.00. Looking online, the typical fee you would be looking at would be between $500.00 and $1000.00 to set up the LLC if you went with a solicitor or similar, so I believe by using Incorp we were able to save some money. It should also be noted that although they are cheaper, I do not believe the people at Incorp were any less knowledgeable. When we submitted our application, we were assigned a personal salesperson, who helped us every step of the way with the LLC set up. As we did not fill out the forms correctly the first time, the salesperson was able to help us ensure the forms were filled out correctly. Overall I would highly recommend Incorp for their services, they allow establishment in all states of the US, and respond quickly to all queries you many have.

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