Tag Archive for: offshore LLC

How to invest your IRA in foreign real estate

How to invest your IRA in foreign real estate

In this post, we’ll look at how to invest your IRA in foreign real estate. That is real property outside of the United States, including a rental property, commercial property, raw land, and non-traditional high yield investments such as timber. Here’s everything you need to know to invest your IRA in foreign real estate.

First, let’s consider which IRA and 401K accounts can be invested in foreign real estate. Only a “vested” account can be invested in foreign real estate. A retirement account typically becomes vested when it moves from a previous employer to a new custodian… when you leave a job.

That is to say, a vested account is an account from a previous employer. When you left that job, the account left with you and is now under your control. A vested account can be moved to a US custodian that specializes in foreign real estate or into an offshore IRA LLC.

There are cases where a portion of your retirement account will vest if you’ve been with the same employer for many years. If you’ve been with the same company for a decade or so, you might want to discuss this with your human resources office.

There are also cases when a Defined Benefit Plan can be invested in foreign real estate. If you can convert your DB plan to an IRA, then it can be invested outside of the United States. You should ask your plan administrator if you can convert to an IRA.

Now that you know which of your retirement accounts have vested, here are the two methods that allow you to invest your IRA into foreign real estate:

  1. Move your retirement account to a US self directed IRA custodian that is experienced in foreign real estate investments, or
  2. Form an offshore IRA LLC and invest your retirement account into that LLC.

The first of these options has minimal costs while the offshore IRA LLC gives you maximum control over your retirement account.

Because your IRA has vested, you can move it to any licensed custodian in the United States. Yes, you must always have a US custodian, even if all of your investments are held abroad.

So, to invest in foreign real estate with minimal costs, you move your IRA from your current custodian to one that allows for investments in foreign real estate.We call these self directed accounts or SDIRAs.

I’d say 95% of custodians don’t allow for foreign investments. It takes effort to find a good SDIRA custodian experienced in these matters (we can introduce you to one at no cost – info@premieroffshore.com)

Fyi… the reason most custodians don’t allow for foreign real estate investments is that they make most of their money selling investments. When you buy foreign real estate with your self directed IRA, your custodian doesn’t make a commission. Thus, most custodians will try to dissuade you from investing abroad.

In contrast, self directed custodians that allow for foreign real estate in your IRA charge a monthly fee. Your costs are fixed and you keep 100% of the profits from your investments.

The second method of investing your IRA in foreign real estate is to form an offshore IRA LLC. In this structure, we form an international Limited Liability Company for you in a zero tax jurisdiction such as Belize, Cook Islands, Nevis, etc. We then open a bank account and appoint you as the administrator of that LLC.

Once the offshore IRA LLC is incorporated an the bank account is opened, your US custodian invests your retirement account into this LLC. From here, you’re the signor on the account and in total control. You send the wires and write the checks.

Because an offshore IRA LLC puts you in control, it’s best for those that want to manage an active investment account. For example, if you want to invest in cryptocurrency, gold, or trade stocks – in addition to buying foreign real estate – then an offshore IRA LLC is the way to go.

To put this another way, I recommend the offshore IRA LLC to active traders and those who want to hold crypto in their account. Because it costs about $3,500 to setup an offshore IRA LLC, it’s not cost effective for those with smaller accounts and those who plan to make only one or two foreign investments.

Lastly, there are a number of non-traditional high yield investments found outside of the United States open to IRA investors. The most popular are crypto and timber. Timber is interesting for many reasons. Because of its holding period an stable demand curve, some crypto investors are buying this asset as a hedge against volatility.

The reason I like timer is that you can realize a sold return AND get residency in a foreign country with your IRA. Invest $22,000 in Panama’s Friendly Nations Reforestation Visa and receive residency. After 5 years of residency you can apply for citizenship and a second passport.
I hope you’ve found this article on how to invest your IRA in foreign real estate to be helpful. For more information in forming an offshore IRA LLC or to be introduced to a custodian that’s experienced in foreign real estate transaction, please contact me at info@premieroffshore.com or call us at (619) 483-1708. We’ll be happy to help you to structure your international investments.

How to trade cryptocurrency and manage investments for others without a license

How to trade cryptocurrency and manage investments for others without a license

I get a number of emails from readers each week asking how they can manage money for friends and family offshore. They want to trade cryptocurrency and make investments for others without going to the expense of setting up a licensed and regulated exchange. So, here’s how to trade cryptocurrency and manage investments for others without a license.

When you want to trade crypto or other assets for anyone other than yourself, you need an account that allows you to hold other people’s money. Banks are very cautious when it comes to those trading on behalf of others or managing investments without a license.

First, banks don’t want to be fined for facilitating money laundering. Banks paid hundreds of millions in the last few years for “allowing” their customers to avoid taxes and launder illicit gains. The bank might not have had any idea what was going on, but their due diligence procedures weren’t stringent enough to catch the wrongdoers, so they were fined big time.

Second, banks and governments don’t want anyone without a license managing other people’s money. Brokerage and investment management licenses and regulation is big business. If you don’t want to pay, you won’t be allowed to play.

Third, banks must follow strict Know Your Client (KYC) rules. When you open an account, the bank checks you out and thereby knows you, their customer. If you then receive friends and family or customer money in your bank account, the bank doesn’t “know” the true beneficial owner of the money. The actual owner is one level removed from the person the bank “knows.”

Setting up an offshore corporation and hoping for the best is not a good idea in today’s world. Banks are watching for the source of funds on most wires. They will check outflows and for anyone using their account to manage OPM. If you try to hide, you’ll be caught and kicked to the curb.

Against that backdrop, here’s how to trade cryptocurrency and manage investments for others without a license.

When you don’t want to set up a regulated exchange, which can cost $35,000 to $250,000, depending on the country, you can use offshore LLCs and a trading corporation to accomplish your goals.

You, the trader form an investment corporation and a management LLC. Then, each and every client forms an offshore LLC. Yes, every single client, friend, or family, must have their own offshore corporation. Only a husband and wife can have a joint LLC.

Next, all of these structures open offshore accounts at the same international bank. In this way, the bank has done its due diligence on you and your customers. Everyone has been reviewed and approved by the bank and transfers will be permitted between the group of companies.

Once everyone has been approved, the client LLCs can issue a Power of Attorney to your management LLC. With this Power of Attorney on file with the bank, you will be allowed to manage the investments of these clients and transfer funds into your investment corporation.

This multi LLC offshore investment management structure ticks all the right boxes. It allows you to manage client funds and for the bank to do its KYC on everyone involved. Because all the accounts are at the same bank, transfer costs are minimized and the source of funds won’t be questioned.

A separate LLC system to trade cryptocurrency and manage investments for others without a license works well with large investors. Because of the setup costs, it’s not efficient for smaller clients or selling investments to the general public.

This practical limitation is positive for banks. They don’t want someone operating an unregulated offshore hedge fund selling to mom and pop investors. This will only bring trouble and litigation to the bank. They like larger accounts, larger deals, and sophisticated investors.

This system also allows sophisticated investors to put more advanced structures in place. For example, they might want to trade within an international trust for estate and asset protection reasons. High net worth investors might want to hold the LLC inside an offshore life insurance company to eliminate US tax on the capital gains.

You can also use this structures to create private entities in countries with public registries. For example, let’s say you want to invest in Panama. That country has a public registry of corporate shareholders and directors and a list of beneficial owners of foundations (their version of a trust).

To keep your name out of the registry, you can set up an offshore LLC in a country like Nevis or Belize that doesn’t have a public registry. Then, this LLC can be the founder of a foundation or the officer and director of a Panama corporation. In this way, the beneficial owner (you) won’t be listed in the registry.

When someone searches the Panama database, all they’ll see is the name of your Belize LLC. When they go to Belize for more information, they’ll hit a brick wall.

Whether this offshore LLC structure is cost-effective will depend on how many clients/friends and family you plan to manage. In most cases, the base corporation might cost $3,500 and each LLC $2,000 to $2,900 to set up (not including bank fees).

The largest structure I’ve seen like this was 3,400 LLCs and two management corporations in Switzerland. Why, you ask, would someone spend that kind of money on LLCs? Because they don’t want to go through all the compliance and regulation that comes with a fully licensed exchange.

Had they decided to operate as an investment manager in Switzerland, they would have had to hire someone with the necessary Swiss licenses and go through a very arduous registration process. The multi LLC model eliminated both of these requirements.

Plus, once you have a license, you have quarterly filing, KYC and AML compliance, and all manner of regulations to contend with. When you use separate offshore LLCs, it’s a private transaction between you and your friend/client.

Finally, this system allows some clients to move their retirement accounts offshore. They could form an offshore IRA LLC and transfer some or all of their vested retirement savings into that entity. Then, that LLC could issue a POA to you, the trader.

As you can see, this multi offshore LLC approach to trading cryptocurrency and managing OPM for others without a license can be a very powerful tool.

I hope you’ve found this article on how to trade cryptocurrency and investments for others without a license to be helpful. For more information on setting up a regulated or unregulated crypto trading business, please contact me at info@premieroffshore.com or call us at (619) 483-1708. We’ll be happy to assist you with an offshore structure and banking.

offshore trust

Offshore Trust vs Offshore LLC

You’re ready to move some of your assets offshore. But, which structure is best? Should you set up an offshore trust or an offshore LLC? In this article I’ll compare the offshore trust vs the offshore LLC.

I’m focused on offshore trust vs offshore LLC. Both of these structures are meant to protect your after tax passive investments. If you’re going to operate a business offshore, then you will need an offshore corporation.

An offshore corporation can be held by a foreign trust. However, the trust may not operate a business directly. A corporation should hold the business and a trust can hold that corporation.

Also, an offshore IRA LLC is very different from a standard international LLC. An IRA LLC is a specially designed structure to hold your retirement account and only your retirement account. You can’t mix retirement money with personal savings and offshore IRA LLCs are single purpose vehicles.

Finally, there’s a hybrid structure called a foundation. These are available in Panama and Liechtenstein, with the vast majority being set up in Panama. A foundation is a mix between an offshore corporation and an asset protection trust. For a comparison of trusts and foundations, see: Offshore Trust or Panama Foundation?

So, this article will look at standard offshore LLCs compared to offshore asset protection trusts. These are the two most common asset protection structures for passive income and protecting after tax savings.

Two similarities both structures share are 1) the need to follow US transfer rules, and 2) the need to follow US tax rules.

US owners of offshore trusts and offshore LLCs must file foreign tax returns with the IRS. In most cases, the earnings and profits in these passive holding structures will be taxable as earned.

The tax return for an offshore LLC is much less detailed than for an offshore trust. Therefore, an offshore LLC tax return should cost you less in prep fees each year. Most LLC returns cost $850 while trusts are usually $2,500 or more.

For this reason, those looking to reduce carrying costs and annual fees will prefer an offshore LLC to an offshore trust. Also for this reason, we usually recommend a trust for those with at least $1 million in assets to protect.

Both structures need to follow US transfer rules. A fraudulent conveyance is a transfer made to keep money away from a current or reasonably anticipated civil creditor. In most cases, any transfer made to prevent the IRS or other US government agency from taking money away from you will also be a fraudulent conveyance.

This means that you can’t transfer money out of the United States and into an offshore trust or offshore LLC with the intention of protecting it from a current or reasonably anticipated civil creditor. A creditor is “reasonably anticipated” if the harm has occurred but they haven’t yet filed a case against you.

For example, if you hit someone with your car today, and send all of your money out of the US and into an offshore trust tomorrow, that’s probably a fraudulent conveyance that will be reversed by a US court.  If you send your money offshore today and injure someone with your car tomorrow, that’s probably not a fraudulent conveyance.

The most important difference between an offshore LLC and an offshore trust is flexibility. An offshore LLC is meant to hold your foreign assets and investments and will transfer to your heirs through your US will. That’s all it does… hold assets and nothing more.

On the other hand, an offshore trust can be configured to your specific needs. An offshore trust provides maximum asset protection and estate planning. An offshore trust can give you access to large international banks that won’t accept lesser structures.

When combined with an offshore life insurance policy, an offshore trust can eliminate US tax on your passive gains. A US compliant life policy inside an offshore trust basically creates a massive tax free structure.

If you hold the policy inside an offshore trust until you pass away, then the assets will transfer to your heir tax free. If you cancel the policy during your lifetime, you’ve got tax deferral, much like a traditional IRA. If you hold the policy until your death, you get tax free, much like a ROTH.

But this flexibility means that it takes a lot more work on your lawyers part to build an offshore trust than it does to set up an offshore LLC. For this reason, a trust is usually 3 or 4 times more expensive than an offshore LLC.

I hope this article on offshore trust vs offshore LLC has been helpful. For more information, or to set up a confidential consultation, please contact us at info@premieroffshore.com or call (619) 483-1708. We’ll be happy to review your situation and help you to build a compliant and efficient asset protection structure.

offshore LLC

US Filing Requirements for Offshore LLCs

Did you form an offshore LLC last year? Are you using an offshore LLC to hold foreign investments or to protect an international bank account? Here are your US filing requirements for that offshore LLC.

As the owner of an offshore LLC, you’ll need to file an entity election form, an annual tax return, a foreign bank account report, and possibly a statement of foreign assets. Here are the primary US filing requirements for offshore LLCs.

IRS Election to be Classified as a Disregarded Entity

Most offshore LLCs used as investment holding companies should be classified as disregarded entities for US tax purposes. This means that income and profits flow through to your personal tax return (Form 1040) as they are earned.

An offshore LLC owned by one person is a disregarded entity. An offshore LLC owned by a husband and wife, who live in a community property state, is also a disregarded entity. An offshore LLC owned by two people who are not married is a partnership.

Note that only offshore business profits can be held in an offshore corporation as retained earnings. Thus, only business profits can be deferred using a foreign structure.

Because there is no US tax benefit for passive investors in using an offshore corporation, they usually select an LLC with disregarded entity status. This is because the IRS form required from a disregarded entity is much easier (and cheaper) to complete than the one for an offshore corporation.

You must file a form with the US IRS to classify your offshore LLC as a disregarded entity, partnership or corporation. That is to say, you need to select this classification by telling the IRS your preference.

To select your classification, you should complete IRS Form 8832 within 75 days of forming your offshore LLC. I suggest you send in this form as soon as you receive your company documents from the registrar.

As you go through this form, you’ll see that there is a default classification for various entities. If you’re at all unsure, send in the form. It’s better to get the guaranteed result by filling in one extra form than wonder or make a mistake.

Also note that there are some structures that can’t elect to be treated as a partnership or as a disregarded entity. See page 7 of the instructions to Form 8832 for a list of those entities. In most cases, a corporation can’t elect to be treated as a disregarded entity.

Annual Tax Return for an Offshore LLC

Once your international LLC is categorized as a disregarded entity, you must file IRS Form 8858 each year. This form reports income, expenses and transactions involving the LLC, all of which should flow-through to your personal return.

Form 8858 is a simplified tax return that just asks for the basics on your foreign transactions. It’s attached to your personal return (Form 1040), so no need to send in a separate packet. This also means it’s due whenever your personal return is due (April 15 or October 15).

If you didn’t make the election to be considered a disregarded entity, then you might need to file a Foreign Partnership Return (IRS Form 8865) for a Foreign Corporate Tax Return (IRS Form 5471). Both of these take a lot more work to complete than Form 8858.

It’s very important that you file Form 8858 every year. The penalties for missing it are outrageous.

The penalty for failing to file IRS Form 8858 is $10,000 per year. If the IRS sends you a notice reminding you to file, the penalty becomes $10,000 + another $10,000 for every 90 days you refuse to file after being notified. The cumulative penalty can be $50,000 per year per entity. See page 2 of the instructions to Form 8858 for more details.

Foreign Bank Account Report for an Offshore LLC

If your offshore LLC opens a bank account, and you’re the signer or beneficial owner of that account, you must file a Foreign Bank Account Report (or FBAR) on FINCEN Form 114.

An FBAR is required for your offshore LLC if you held more than $10,000 in cash or securities in an offshore account. Even if you had that balance for only one day, you must file a foreign bank account report.

Also, this is the cumulative total of all your accounts… all the accounts you are either the signer or beneficial owner of. If you have $5,000 in a personal account and $6,000 in your offshore LLC, then you have $11,000 offshore and need to report.

Like Form 8858, the penalties for making a mistake on the FBAR are quite high. If you think you might need to file, then file. Submitting an extra form to cover your backside is always better than taking a risk of $10,000 to $50,000 a year.

Statement of Foreign Assets

If you have significant assets offshore, you likely need to complete Form 8938, Statement of Foreign Assets for your offshore LLC. Here are the filing requirements for Form 8938.

  • If you’re married filing joint, living in the United States, and have more than $100,000 in foreign assets at the end of the year, or more than $150,000 on any day of the year, you must file Form 8938.
  • If you’re married filing separately, living in the United States, and have more than $50,000 in foreign assets at the end of the year, or more than $75,000 on any day of the year, you must file Form 8938.
  • If you’re single, living in the United States, and have more than $50,000 in foreign assets at the end of the year, or more than $75,000 on any day of the year, you must file Form 8938.
  • If you’re married filing joint, not living in the United States, and have more than $400,000 in foreign assets at the end of the year, or more than $600,000 on any day of the year, you must file Form 8938.
  • If you’re married filing separately, not living in the United States, and have more than $200,000 in foreign assets at the end of the year, or more than $300,000 on any day of the year, you must file Form 8938.
  • If you’re single, not living in the United States, and have more than $200,000 in foreign assets at the end of the year, or more than $300,000 on any day of the year, you must file Form 8938.

These are the most basic filing requirements. You should review the instructions carefully to figure what constitutes a “reportable” asset and whether you need to file this form.  

If you’re unsure, or right on the line, I suggest you send in the form because the penalties for failing to file can reach $50,000 per year (do you see a theme developing?). Better to be safe than sorry when it comes to offshore reporting.

I should also point out that there are a few investments that don’t need to be reported on the FBAR or the Statement of Foreign Assets. Primarily, gold and real estate held in your name outside of the US do not need to be reported.

However, if you hold those assets inside of an offshore LLC, the LLC must be reported. The only time gold and real estate are exempted are when they’re held in your name without a an offshore structure such as an LLC, corporation, trust or foundation.

And, when I say they don’t need to be reported, I mean that your ownership of them does not need to be reported. When you sell, the gain is taxable and is to be reported on your personal tax return. Also, if the foreign real estate is a rental, you must report income and expenses to the United States just as you do domestic property.

I hope you’ve found this article on the offshore filing requirements for offshore LLCs to be helpful. For more information, or to be connected to an international tax expert who can prepare your returns, please contact us at info@premieroffshore.com or call us at (619) 483-1708.