Why do we advise our investors to open an LLC in the USA?
LLC in a sense is an analogue of a “limited liability company”, a well-known legal form of business in the post-Soviet space.
One of the main reasons for choosing an LLC as a form of business registration in the US is the so-called “corporate veil”. This is a way to protect the property of the owner (owners) from the claims of creditors.
The LLC company is perceived as an independent unit, whose obligations are not directly those of the founders.
In other words, if you are a member of an LLC, you are not personally liable for the debts of the business.
Of course, no one will relieve you of full responsibility, but in this way you minimize the risks: creditors have the right to claim only the assets of the company, but not the property of its founders.
❗️ In fairness: in some cases, the corporate veil can be lifted, and the owners will be held personally liable for the obligations of the LLC by the court.
Here are some of the most common situations where this can happen:
🔻Unorganized document flow or its absence
If the document flow is not conducted properly, then in the event of claims of creditors and their appeal to the court, it can be concluded that the LLC participants were hiding behind the name of the company to carry out their private business activities.
🔻Communication and signatures on your behalf
It is important that in any communication with contractors, buyers, authorities, banks, everyone understands that they are not dealing with you personally, but with the company you represent.
Sometimes when signing a contract, the name of the business owner signing the document may be given, but their authority is not indicated. By signing the contract on your own behalf, and not on behalf of the company, you will be personally responsible in case of debt. Keep this in mind when drawing up any documents as part of doing business through an LLC!
☝️ And instead of an afterword.
If you decide to invest in US real estate through Penninvest, we take care of everything related to the legal registration and opening of an LLC, and then the investor can optionally entrust us with reporting and full documentation so that everything happens within the legal framework.