Do You Really Need an International LLC?

He explained his story for a few minutes and when he took a break, I asked him: But what problem does it solve for you?

He couldn’t really answer beyond “I want asset protection.”

Trouble was, he didn’t really need it. Although he was quite wealthy, he was retired and didn’t live a high-risk lifestyle. The chances of him needing the asset protection an offshore company would bring didn’t make sense given the fees and compliance hassles that would come along with it.

I told him so and we made a domestic plan that worked better for him.

And yet… I am regularly asked by folks who don’t need one to help them with an ILLC. Often after learning about it online.

And, as I recently discussed in a more comprehensive report for our Inner Circle members – where I laid out key “litmus test” questions we use in our planning – such tools are simply not needed most of the time.

Most of the time, domestic options work better.

So is there a case for an ILLC? In some cases, yes.

Here are a few examples.

First, when purchasing foreign real estate.

Some jurisdictions offer advantages to tax residents that they don’t to non-residents. If you’re building a real estate portfolio in one place – and you’re not living there – it can sometimes make sense to set up a local structure.

And yes, even if you do live there, a local entity might still make sense depending on your specific goals and what benefits are available in that locale.

Second, holding foreign assets for protection.

For Americans, it’s usually best to avoid using international structures to hold US assets. But for those clients who have overseas assets and want to completely segregate those assets from themselves legally, an offshore structure – a foreign trust and/or an ILLC – can make sense.

Third, running a business abroad.

If you’re a US taxpayer but also tax resident in another country and want to operate locally there, a local entity is often the most straightforward path from both a home-country and US compliance perspective.

Notice something about all three of these scenarios? In each one, the structure came after the strategy — not before. Nobody started with “I need a foreign LLC” and worked backward.

Structure should follow strategy. Not the other way around.

It’s important to understand what specifically you’re trying to accomplish before you select a legal structure.

The alternative is an “orphan” – a structure set up and legally operating but with no practical purpose.

You don’t need that. Figure out what you’re trying to accomplish first and follow the path. It will usually land you in a much better place.

If you already have a foreign structure and need some help managing it, or you are thinking about investing overseas and want to know if a structure makes sense in your case, feel free to get in touch.