USA – NORTH CAROLINA Law and Practice Contributed by: John Livingston and Brittani Miller, Kilpatrick
• Shareholders are taxed on dividends received, which may be taxed as ordinary income or qualify for preferential tax rates. • REITs require significant legal and administra - tive costs to meet Internal Revenue Service (IRS) and Securities and Exchange Com - mission (SEC) compliance, including public reporting and shareholder requirements. LPs For LPs, the main features and tax benefits and costs are as follows. Main features: • General partners have unlimited liability, while limited partners have limited liability and are not involved in management. • General partners manage the partnership, while limited partners are passive investors. • Flexible ownership structure, with profit allo - cations set by the partnership agreement. Tax benefits and costs: • Income and losses are passed through to partners. • General partners are subject to self-employ - ment taxes; limited partners are not taxed on passive income. • Filing fees for Certificates of Limited Partner - ship are USD50. 5.3 REITs REITs are commonly available investment vehi - cles 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 inves - tors. REITs are available to foreign investors, although subject to tax obligations under the Foreign Investment in Real Property Tax Act
(FIRPTA). REITs offer significant advantages, including tax efficiency through exemption from corporate income tax, consistent income gen - eration via the mandatory distribution of at least 90% of taxable income, professional manage - ment, portfolio diversification, and access to real estate markets without direct ownership respon - sibilities. To qualify as a REIT, entities must meet strict requirements under the Internal Revenue Code and comply with reporting and distribution mandates. 5.4 Minimum Capital Requirement There are no statutory minimum capital require - ments for forming entities used to invest in real estate; however, 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 invest - ment entities in North Carolina vary by entity type, with LLCs and corporations requiring for - mal filings, operating agreements or by-laws, and annual reporting, while partnerships and trusts operate under more flexible governance rules. The Financial Crimes Enforcement Network (Fin - CEN) issued an interim final rule that removes the requirement for US companies and US per - sons to report beneficial ownership information (BOI) to FinCEN under the Corporate Transpar - ency Act. Thus, through this interim final rule, all entities created in the USA – including those pre - viously known as “domestic reporting compa - nies” and their beneficial owners will be exempt from the requirement to report BOI to FinCEN. Foreign entities that meet the new definition of “reporting company” and do not qualify for an exemption from the reporting requirements must
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