What is a title company?
Title companies generally represent the transaction and act as the combined agent for the title insurer, the buyer, the seller, and any other parties involved in a real estate transaction, such as the mortgage lender. The responsibilities of a title company are many, the most important being:
- Property title analysis to issue a title insurance commitment. With this step, an investigation of the history of the tenancy is carried out and during this investigation, situations that require fixing before the purchase can be discovered. If there is no solution, it is decided if the title insurance is issued
- Carry out the closing of the transaction, preparing all legal documents; receive the necessary funds from the buyer or banking institution to make the necessary payments, acting as a fiduciary agent. This gives transparency to the transaction.
- Finally, issue a property title insurance to the buyer and the financial institution, guaranteeing a clean title of any title defect.
By taking these steps, the buyer is given peace of mind that their investment is insured against any possible problems related to the ownership of their property.
Buy in your own name or in the name of a company?
One of the first decisions you need to make when purchasing property in the US is under what figure you will purchase it. A property can be purchased in a personal name or in the name of a company. The most used for these cases are: the LLC, INC or Corp. Investment property, almost without exception, must be acquired through the use of a corporation or other entity.
What are the advantages of buying through a company?
- Protects the owner from possible lawsuits related to the property. That is, in the event of a lawsuit, they can only go against that property and not against other property or personal assets.
- Consolidate all income and expenses attributable to this property within a single entity, this will help reduce the tax impact and during the eventual sale of the property.
- Provides flexibility when planning the payment of taxes, in terms of transferring property interests to family members and others.
- Avoid or reduce inheritance taxes, therefore, when the owner of the company dies, the legal entity never dies, thus reducing the amount of inheritance tax.
Do I have to open a company for each property I buy?
Forming a company for each property is really the best protection you can get. In this way the investor limits the legal responsibility to each of the properties. If several properties are under the same entity, the responsibility of one of them could expose the other properties. However, due to the costs of starting, managing and maintaining these businesses, it is common for investors to hold multiple properties under one company.
Estimated costs of opening a company to buy real estate
- Approximate opening cost between $500-$900
- Annual renewal cost ranges from approximately $200-$400
- Accountant fees for administration and annual tax declaration (before May 1) depend on the service and structure requested by each client, but range between $500-$1,000
What is needed to open a company?
- register name.
- Mailing address in the United States.
- Names of directors and their respective identifications.
- Prepare articles of incorporation of the company (work of the accountant).
- Prepare operating agreement (accountant job).
How long does the opening process take?
The process takes between 5-15 business days.
I bought in a personal name, can I transfer it to a company?
It is important that you plan for this before making the transaction; however, if you have already purchased in your personal name, even though it is possible to transfer the property, it is important to consult with an accountant and/or attorney to analyze your specific case and determine the possible legal and financial implications. Among them it is important to determine:
- If FIRPTA applies (foreign investors)
- transfer costs
- If it is taken as a sale
LEGAL NOTE: These provisions are complicated and require the expertise of a CPA and/or real estate attorney to assess potential legal and tax implications. At no time should this information be taken as advice.