Can a Non US Citizen Be the Sponsor of a US Apartment Syndication?
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Yes. Regulation D does not require a sponsor to be a US citizen or resident, so a non US sponsor can raise money for a US apartment deal under Rule 506(b) or 506(c). The hurdles are practical: lenders often want US based key principals or guarantors, the deal must withhold tax on a foreign partner's share, opening bank accounts takes more paperwork and the Form D needs EDGAR access. Plan for these before you announce the deal.
Does the securities law care where the sponsor lives?
Not for eligibility. Rule 506 sets who can invest and how you can offer, not who can be an issuer's manager (17 CFR 230.506). The antifraud rules, the bad actor disqualifications and Form D apply to the deal company and its covered persons wherever they live (bad actor rule 506(d)). Investors in other countries raise a different question, covered in foreign investors in US syndications.
What will lenders ask?
This is usually the hardest part. Agency and bank lenders require key principals and often a guarantor with US based net worth and liquidity, and may want a US credit history, a Social Security number or taxpayer ID and US assets they can reach. Some lenders will not lend to a borrower controlled by a non US person at all. A US co-sponsor who meets the lender's tests is the common fix. See loan guarantor and co-sponsor and key principal.
What about tax?
A foreign partner is taxed on income effectively connected with US real estate, and the partnership generally must withhold tax on that partner's share. The sale can also trigger withholding under the rules for foreign sellers of US real property. These rules change often, so work with a CPA who handles foreign partners (partnership tax filing). Investors have their own questions about state returns (nonresident investors).
Can you get an EIN and a bank account?
Yes, but expect more steps. The IRS issues an EIN for a US company even when the responsible party has no Social Security number, and banks will want proof of identity and beneficial ownership. Some banks will not open an account for a non US owner without in person visits or a US address. See getting an EIN for the deal company and the deal bank account.
What about EDGAR and the Form D?
The Form D is filed through EDGAR, which requires access codes issued through Form ID. A non US filer may need extra documents or a US contact for service of process, and the process takes longer. Start early (EDGAR access and Form ID).
What can you do about it?
Bring in a US co-sponsor or operating partner for the lender, hire a CPA who knows foreign partner rules and a securities lawyer, form the deal company in a US state, keep your documents consistent with the lender's identity needs and start the bank and EDGAR steps before you announce a raise.
Our take
Residency is not a barrier to raising money, but it can be a barrier to financing it. Talk to a lender first. If the loan works, the rest is a checklist.
Trade-offs and who this is not for
- It adds weeks to setup. Plan for them.
- Not for sponsors who need agency debt and cannot add a US key principal.
- Common mistake: announcing the deal before the lender agrees to the sponsor.
- Tax rules for foreign partners are complex. Get a specialist.
How DoorRaise fits in
DoorRaise helps sponsors raise equity for apartment buildings with 5+ units from friends and followers who already trust them, under Rule 506(b) or 506(c). We are software, legal document preparation, escrow coordination and verification services. We are not a law firm, broker-dealer, investment adviser, funding portal, bank or escrow agent, and we do not hold investor money: investors wire their money to escrow at Enterprise Bank & Trust, in the deal's name.
A deal company in a US state, a deal page, documents and escrow in one place help a non US sponsor show lenders and investors a clean structure. Check eligibility rules with your lender and counsel first. Flat fees, never a percentage of the raise (see pricing). Create your free sponsor page.
FAQ
Can a non US resident form a US LLC for a syndication?
Yes. A US LLC can have non US owners and managers. Banks and lenders will ask for more identity and ownership documents.
Do I need a Social Security number to get an EIN?
Not for the company. The IRS has a process when the responsible party has no SSN or ITIN, but it can take longer.
Can I be paid as sponsor if I live abroad?
Yes, but your share of income may be subject to US tax and withholding. Get tax advice.
Can I raise from US investors while living abroad?
Yes, under Rule 506. Follow the same offering rules as any sponsor.
Sources
This article is general information, not legal, tax or investment advice. Talk to a securities attorney before you market an offering. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.