USA – NORTH CAROLINA Law and Practice Contributed by: John Livingston and Brittani Miller, Kilpatrick Townsend & Stockton LLP
5.3 REITs REITs are commonly available investment vehicles in North Carolina, existing in both public and private forms. Public REITs are traded on stock exchanges and regulated by the SEC, while private REITs cater to accredited investors. REITs are available to foreign investors, although subject to tax obligations under the Foreign Investment in Real Property Tax Act (FIRP - TA). REITs offer significant advantages, including tax efficiency through exemption from corporate income tax, consistent income generation via the mandatory distribution of at least 90% of taxable income, pro - fessional management, portfolio diversification, and access to real estate markets without direct owner - ship responsibilities. To qualify as a REIT, entities must meet strict requirements under the Internal Revenue Code and comply with reporting and distribution man - dates. 5.4 Minimum Capital Requirement There are no statutory minimum capital requirements for forming entities used to invest in real estate; how - ever, sufficient funding is needed to cover formation costs, operational expenses and investment needs to avoid insolvency issues. 5.5 Applicable Governance Requirements Governance requirements for real estate investment entities in North Carolina vary by entity type, with LLCs and corporations requiring formal filings, oper - ating agreements or by-laws, and annual reporting, while partnerships and trusts operate under more flex - ible governance rules. The Financial Crimes Enforcement Network (FinCEN) issued an interim final rule that removes the require - ment for US companies and US persons to report ben - eficial ownership information (BOI) to FinCEN under the Corporate Transparency Act. Through this interim final rule, all entities created in the USA – including those previously known as “domestic reporting com - panies” – and their beneficial owners will be exempt from the requirement to report BOI to FinCEN. Foreign entities that meet the new definition of a “reporting company” and do not qualify for an exemption from the reporting requirements must report their BOI to FinCEN under new deadlines, detailed below. These foreign entities, however, will not be required to report
any US persons as beneficial owners, and US persons will not be required to report BOI with respect to any such entity for which they are a beneficial owner. LLCs Governance requirements • LLCs are governed by the North Carolina Limited Liability Company Act. • LLCs must file Articles of Organisation with the North Carolina Secretary of State. • LLCs can be member-managed (managed by the owners) or manager-managed (managed by desig - nated managers). • An operating agreement (though not legally required) typically outlines governance rules, mem - ber rights, voting procedures, profit distributions and dispute resolution. • Annual reports must be filed with the state along with a USD200 fee. REITs Governance requirements • REITs are typically structured as corporations or trusts and must comply with the governance requirements for those entities. • Public REITs are subject to SEC regulations, requir - ing detailed governance structures, regular report - ing and transparency. • REITs must have a board of directors or trustees and distribute at least 90% of taxable income to shareholders. • Shareholder meetings and voting are required for corporate decisions. LPs Governance requirements • LPs are governed by the North Carolina Uniform Limited Partnership Act. • LPs must file a Certificate of Limited Partnership with the Secretary of State. • An LP consists of general partners (who manage the partnership and have unlimited liability) and limited partners (who are passive investors with limited liability). • A partnership agreement governs operations, profit-sharing and decision-making.
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