US property via an LLC: the penalty and the estate tax
An LLC solves liability, but creates a US$25,000 annual penalty and does not shield you from US estate tax — up to 40% above just US$60,000.
Buying an apartment in Miami or Orlando through an LLC has become almost a reflex. The advice circulates in groups, at brokerages and in videos: “open an LLC, it protects your assets, it’s simple.” The “simple” part is true. The “protects” part depends on against what — and that is where the problem lies.
An LLC handles civil liability well. But it creates two bills most buyers only discover later: an annual filing obligation with the IRS carrying a US$25,000 penalty for non-compliance, and exposure to the US estate tax that the LLC, contrary to what many believe, does not remove — and that can take up to 40% of the property’s value on the owner’s death.
This article covers both bills with the rule cited, explains why the ordinary LLC does not protect the inheritance, and shows what actually changes the outcome — always with the caveat that every structure solves one tax and creates another, and requires analysis on both sides of the border.
The first bill: the obligation no one mentions at the sale
A single-member LLC owned by a foreigner is, for US income tax, a disregarded entity — the IRS “ignores” the company and looks straight at the owner. Many conclude that, with no income and no activity, there is nothing to file. Wrong.
Since 1 January 2017, under a US Treasury regulation, every single-member LLC owned by a foreigner must file Form 5472 annually, together with a pro forma Form 1120, even with no income or activity in the year. The form assesses no tax — it is informational, giving the IRS visibility over transactions between the company and its foreign owner.
The cost of ignoring it is out of all proportion to the effort of complying. The penalty for failing to file, filing late or filing incompletely is US$25,000 per form, per year, with no cap — and grows by US$25,000 for each 30-day period after an unanswered IRS notice.
It is a real, serious obligation. But it is a compliance bill — manageable, predictable, of known cost. The second bill is of a different nature.
The second bill: the US estate tax
Here is the risk that rarely comes up in the sales conversation, and that for many families is far larger than the penalty.
The US levies an estate tax on assets situated there. For a US citizen or resident, that tax only reaches very large estates. For a non-resident, non-domiciled individual — the situation of the European or Latin American who lives abroad and owns property in Miami — the exemption is just US$60,000. Above that, the rate reaches 40% of the asset’s value.
Real estate is, by definition, situated in the US. Someone who dies owning an US$800,000 apartment in Florida leaves their heirs an estate-tax exposure on almost the entire value — and US probate will not release the asset to the heirs until the tax is paid, with the filing of Form 706-NA.
And there is an aggravating factor: many countries have no estate-tax treaty with the US. There is no treaty widening that US$60,000 exemption, and no reciprocal credit: the same property can be reached by the US estate tax and by the inheritance tax of your country of residence, with neither offsetting the other.
Why the LLC does not solve the second bill
This is the point the counter advice almost never clarifies.
The single-member LLC is disregarded for situs purposes too. The IRS and US courts generally treat a holding in an LLC that owns US real estate as itself an asset situated in the US. In other words: the LLC layer does not remove the property from the owner’s US estate for estate-tax purposes. You file the 5472 every year, keep the LLC in order — and, on death, the property remains subject to the estate tax as if held in your own name.
What actually removes the estate tax is changing the situs of what the owner holds. When the property is held by a foreign corporation (not a US one), what the owner holds are shares in a foreign company — and shares in a foreign company are not an asset situated in the US. On death, the property sits outside the US estate.
But — and this is the essence of honest planning — the foreign corporation solves the estate tax and creates others.
The trade-off every design imposes
There is no free structure. Each solves one tax and triggers another.
| Structure | Estate tax on death | Income / sale | Admin burden |
|---|---|---|---|
| Property in your own name | Full (US$60,000 exemption, up to 40%) | Rent and gain on the individual; FIRPTA on sale | Lower |
| Single-member LLC | Full — the LLC does not block it | Same as own name; 5472 required | Low, with the filing obligation |
| Foreign corporation holding the property | Blocked (shares = foreign asset) | Corporate tax, possible 30% branch-profits, no reduced long-term-gain rate | Higher and costlier |
The foreign corporation that saves the inheritance tends to raise the income-tax burden and the cost; the cheap, simple LLC does not protect the inheritance. The optimal point depends on the property’s value, the horizon (living, renting, reselling), personal use and who will inherit.
A note on responsibility: choosing the structure to hold US property involves US rules (estate tax, FIRPTA, corporate tax, branch profits) and your country’s rules (inheritance tax, tax transparency, exchange controls) that interact, and whose limits and rates are revised. No structure should be replicated from a video or a neighbour: the right one for a personal-use property is the wrong one for a rental portfolio. We confirm the rules in force in the official US sources and in your jurisdiction, and analyse the specific case, on both sides, before any recommendation.
While the property exists: rent and sale
Two running bills complete the picture, and apply whether held in your own name or through a disregarded LLC.
Rent. By default, a non-resident’s rental income suffers a 30% withholding on the gross amount (FDAP regime), with no deduction of expenses. There is an election — made on the US return, with Form W-8ECI given to the payer — to be taxed on the net, deducting expenses and depreciation, at graduated rates. For properties with meaningful costs, the difference is large.
Sale (FIRPTA). When a non-resident sells US property, the buyer must withhold 15% on the gross sale price (not the gain), as a prepayment. The actual gain is taxed at capital-gains rates (up to 20% long-term). Because the 15% falls on the whole price, more than the tax due is often withheld; a withholding certificate from the IRS, requested in advance, or the subsequent return, allows the excess to be adjusted or recovered.
Frequently asked questions
My LLC had no income. Must I still file?
Yes. A foreigner’s single-member LLC must file Form 5472 annually, even with no income, under a US$25,000-per-form penalty.
Does the LLC protect my heirs from the US estate tax?
No. A holding in an LLC that owns US property is treated as an asset situated in the US. The LLC does not remove the estate tax.
How much is the estate-tax exemption for non-residents?
Just US$60,000 on assets situated in the US, with rates up to 40%. Many countries have no treaty with the US to widen it.
Can my US property be taxed in my country too?
It can. Without a reciprocal credit, the same property can suffer both the US estate tax and your country’s inheritance tax.
How to verify for yourself
- Form 5472 and the disregarded-entity obligation — official instructions at the IRS.
- Estate tax for non-residents and Form 706-NA — the IRS page on estate tax for a “nonresident not a citizen”.
- Inheritance tax in your jurisdiction — the tax authority of your country of residence.
If any figure or rule differs from the official source when you read it, the official source prevails.
Where to start
The LLC is not wrong — it simply does not do what many believe it does. It protects against lawsuits and simplifies ownership. Against the IRS penalty, it demands a filing routine. Against the US estate tax, it does nothing.
The right question before buying is not “do I open an LLC?” It is “how do I hold this property so that the inheritance, the rent, the sale and my home-country tax all close together?”
That is what our work in wealth protection and succession and inheritance is about: designing the right structure before the purchase, on both sides of the border.
One conversation is enough to know whether your structure protects what you think it protects.
Informational content. It does not constitute legal, tax, accounting or investment advice, nor an opinion on US law. The rules cited were verified against the official sources indicated in July 2026 and may change. International structures require individual analysis, with advisers in the United States and in your country.