LLC vs Personal Ownership for US Property

The Ownership Structure Decision

One of the most important decisions Canadian buyers face when purchasing US real estate is how to hold the property. The two most common options are personal name ownership and ownership through a US Limited Liability Company (LLC). Each structure has significant implications for liability protection, income taxation, capital gains treatment, mortgage qualification, and estate planning.

There is no single correct answer — the best structure depends on whether the property is a vacation home or investment, your tax bracket, your estate size, and your long-term plans for the property.

Side-by-Side Comparison

Factor	Personal Ownership	LLC Ownership
Liability Protection	None — personal assets at risk	Strong — liability limited to LLC assets
Setup Cost	$0	$500–$2,000+ (formation, registered agent, annual fees)
US Income Tax Rate	Graduated rates (10%–37%)	Same if single-member disregarded entity
Canadian Tax Treatment	Direct foreign income reporting	May be treated as corporation by CRA — potential double tax
Capital Gains — US	Favorable long-term rates (0%–20%)	Same if disregarded entity; higher if corporate election
Treaty Benefits	Full Canada-US Tax Treaty protection	May be limited — CRA may deny treaty benefits on LLC income
Mortgage Options	Foreign national, DSCR, conventional	Primarily DSCR and commercial loans
Mortgage Rates	Generally lower	May be 0.25%–0.5% higher
Estate Tax Exposure	Direct US estate tax applies	LLC alone doesn't avoid estate tax
Privacy	Personal name on public records	LLC name on records (varies by state)
Annual Compliance	US tax return only	LLC annual report, US tax return, potential CRA foreign reporting

When Personal Ownership Makes Sense

Personal ownership is typically recommended for Canadians purchasing vacation homes or second homes for personal use. The simplicity, full access to Treaty benefits, wider mortgage options, and lower long-term capital gains rates make it the preferred choice for most personal-use properties. If liability is a concern, umbrella insurance policies can provide additional protection at a fraction of the cost of maintaining an LLC.

When LLC Ownership Makes Sense

LLC ownership is often preferred for investment properties, particularly those with rental income. The liability protection is valuable when tenants are involved, and DSCR loans through LLCs can actually be easier to qualify for since they are based on property income rather than personal income. Multi-property investors often prefer the organizational benefits of separate LLCs for each property. LLC ownership also provides flexibility for future partnership structures and can simplify property management.

The Canadian Tax Trap With LLCs

The CRA (Canada Revenue Agency) does not recognize the US "disregarded entity" classification for single-member LLCs. Canada may treat the LLC as a foreign corporation, which can create situations where income is taxed at corporate rates in the US but not eligible for full foreign tax credits in Canada. This can result in double taxation that wouldn't occur with personal ownership. This is one of the most common and costly mistakes Canadian buyers make when structuring US property purchases.

Frequently Asked Questions