When it comes to owning property in Costa Rica, you have the option of holding it either in your personal name or through a corporation (LLC). Let’s explore the pros and cons of each approach:
Ownership in your Personal Name
Simplicity and Direct Control: Owning property in your personal name offers simplicity. You have direct control over the asset, making it easier to manage, sell, or transfer. There’s no need to navigate corporate governance or deal with additional administrative tasks associated with an LLC.
Lower Initial Costs: The initial setup involves fewer legal and administrative steps, reducing the costs associated with establishing an LLC.
Lower Taxes: If the property is your Costa Rica primary residence then you will be exempt from capital gains when selling the property.
Ease of Estate Planning: In some cases, transferring property upon death can be more straightforward when owned in a personal name, especially if the owner’s home country has treaties with Costa Rica that simplify international inheritance issues.
Personal Liability: Owning property in your name exposes you to personal liability. In the event of legal action related to the property, your personal assets are at risk.
Limited Flexibility: You won’t have the estate planning, tax management, and legal benefits that come with a company.
Privacy Concerns: Ownership in your personal name is publicly recorded, offering less privacy than an LLC.
Ownership through a Costa Rican LLC
Asset Protection: Assets are held within the LLC structure, shielding them from personal liabilities
Flexibility in Ownership: An LLC allows for more sophisticated ownership structures, including multiple owners or partnerships.
Estate and Succession Planning: An LLC can offer more options for estate planning.
Higher Setup and Maintenance Costs: Establishing and maintaining an LLC involves legal fees, registration costs, and annual taxes.
Complexity and Administrative Requirements: Operating an LLC requires compliance with Costa Rican company and tax laws, including annual tax filings, maintaining corporate books, and other administrative duties. This complexity demands time and, often, the assistance of local legal and accounting professionals.
Imperfect Protection: While better than personal ownership, it’s not foolproof.
The choice between owning Costa Rican property in your personal name or through an LLC hinges on several factors: the scale of the real estate investment, appetite for risk, administrative capacity, and long-term plans for the property. Personal ownership suits those seeking simplicity and direct control, albeit with higher personal liability and potential privacy concerns. In contrast, an LLC offers limited liability, flexibility, and estate planning advantages but at the cost of higher initial and ongoing expenses and administrative complexity.
Before deciding, it’s crucial to consult with legal and tax professionals familiar with Costa Rican and the tax laws of your home country, ensuring your decision aligns with your objectives, legal obligations, and financial planning goals.