USA Law and Practice Contributed by: Richard L. Rosen, Leonard S. Salis and Dennison Marzocco, Rosen Karol Salis PLLC
and responsibilities, as well as how they share in the profits and losses of the business, which results in tax ramifications for the partners. 5.3 REITs REITs invest in real estate, leasing and collecting rent - al income. REITS are subject to complex tax rules and regulations, and they may provide significant tax advantages for their investors. A REIT must be formed as an entity that is taxable (federally) as a corporation. A REIT must be governed by directors or trustees, and its shares must be transferable. Investors receive prof - its in the form of dividends or as “appreciation”, upon the disposition of assets purchased by the REIT. REITs are real estate investment vehicles commonly utilised throughout the USA, and they can be classified as either public or private, traded or non-traded. Publicly traded REITs, which are regulated by the US Securi - ties and Exchange Commission (SEC), are relatively easy to liquidate. Private REITs, which are not traded on the securities markets, are therefore generally less volatile, but are not as easy to liquidate. Private REITs may sell securities to qualified institutional investors and to sophisticated so-called “accredited” individual investors. Investing in US REITs can be a beneficial investment approach for certain foreign investors, who may benefit from investing in US REITs as they may receive ordinary dividends, capital gains and return-of-capital distributions. In addition, through sophisticated tax planning, they may reduce their US tax liability. 5.4 Minimum Capital Requirement Some states have no minimum capital requirement for business entities, while others may require a small amount, as low as USD1,000. There is no minimum capital requirement specifically for real estate entities. However, lenders and other third parties may impose their own capital requirements. Inadequate capitalisa - tion of the entity could expose its owners to personal liability, by piercing of the “corporate veil”, although litigation is required to achieve such a result. 5.5 Applicable Governance Requirements State laws govern LLCs, corporations and limited partnerships, setting default rules for governance and operations, unless the entity’s owners have provided
otherwise in their governing agreements. For example, state laws may require that a certain minimum voting percentage – such as 66% or two thirds of votes – be met for the entity to approve certain matters or transactions. As stated previously, LLCs provide their members with a great deal of flexibility with respect to how the entity is structured, managed and operated, where - as S corporations (and C corporations) have stricter governance requirements and offer less flexibility. In limited partnerships, the GP(s) provides the govern - ance and management function, while the LPs typi - cally have limited voting and control rights over the entity’s affairs. In 2024, a new federal law, the Corporate Transpar - ency Act (CTA) was enacted in order to enhance transparency in business ownership and to combat illicit activities such as terrorism financing and money laundering. Under the CTA, business entities were to be required to disclose information to the federal government regarding their beneficial owners. How - ever, the enforcement of the CTA has been delayed several times as a result of court decisions, and on 2 March 2025, FinCEN, a regulatory body of the US Treasury Department, announced that it would sus - pend enforcement of the CTA against US citizens and domestic business entities. While the US Court of Appeals for the Eleventh Circuit reversed the rul - ing of the district court and held that the CTA is a constitutional exercise of Congress’s authority under the Commerce Clause in December 2025, FinCEN’s administrative rule which exempts most domestic US entities from filing under the CTA still remains in place. Beginning 1 March 2026, FinCEN required real estate professionals to report non-financed residential real estate transfers to legal entities or trusts (as opposed to individuals), in an effort to target potential money- laundering schemes. The reporting person, usually a settlement agent or an attorney, was required to file a “Real Estate Report” which disclosed details regard - ing the purchasing entity, beneficial owners owning at least 25% of the entity, signers and the seller. How - ever, on 19 March 2026, a federal Texas court ruled that FinCEN exceeded its authority under the federal Bank Secrecy Act, essentially vacating the federal
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