Purchasing a property through an LLC for real estate in Puerto Rico has benefits and also a few implications. Here are the most important aspects to know.

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Purchasing a property through an LLC has benefits and also a few implications. The purpose of this post is not to discourage anyone from using an LLC, but rather to provide information on some of its implications.

First and perhaps foremost, the Puerto Rico Power Authority (“PREPA”) will want to charge your electricity at commercial rates which are higher than regular (and lower) residential rates.

PREPA employees deduct that, if you are using an LLC, then the purpose of your purchase must be commercial. In some cases, we have been able to convince the PREPA personnel–when warranted–that the person is using an LLC for reasons other than those normally associated with commercial activities.

Another consequence could very well be insurance. Commercial insurance coverage is more expensive than residential. Anyone using an LLC for acquiring a property in Puerto Rico should consult with their insurance broker or agent prior to making the purchase.

If someone is using an LLC from outside of Puerto Rico to purchase real estate, it is critical that the LLC be registered in Puerto Rico as a “foreign” entity authorized to do business in Puerto Rico. The concept of “foreign” relates to “foreign to Puerto Rico” and not foreign to the United States as a country. The registration is only a filing with the Puerto Rico State Department and does not implies or can be compared to a business license application.

The filing is critical for one simple reason: if the LLC is not registered with the State Department, the members of the LLC are personally liable for any claims against the LLC.

Very truly yours,

Santiago F. Lampón