Buying Cabo Property Through a US LLC or Trust: What Actually Works

A US LLC can be the beneficiary of a Mexican fideicomiso — and for the right buyer, this structure saves thousands in transfer costs and adds meaningful asset protection. But for the wrong buyer, it creates unnecessary complexity with zero practical benefit. I have advised on both sides of this decision in Los Cabos, and the answer always comes down to three factors: how long you plan to hold, whether you plan to transfer ownership, and how many properties you intend to own.

How the LLC-Fideicomiso Structure Works

In Mexico's restricted zone — the 50-kilometer strip along the coast that includes all of Los Cabos — foreigners cannot hold direct title to residential property. Instead, a Mexican bank holds title through a fideicomiso (bank trust), and you are the beneficiary with full ownership rights. The beneficiary can be an individual, or it can be an entity — including a US LLC.

When your LLC is the beneficiary, the ownership chain looks like this:

1. The Mexican bank (trustee/fiduciario) holds legal title to the property
2. Your US LLC is the beneficiary of the fideicomiso with full rights to use, rent, renovate, and sell
3. You are the member/owner of the LLC

This adds one layer of separation between you personally and the property — which is the entire point. That layer provides asset protection and, critically, transfer flexibility.

The Transfer Advantage: Why This Structure Saves Money

Here is the practical benefit most buyers care about. When an individual is the fideicomiso beneficiary, selling the property requires:

• A formal fideicomiso transfer (substitution of beneficiary) — $2,500-$6,000
• A new SRE permit for the buyer — 10-20 business days
• Full notario involvement with a new escritura
• Transfer taxes (ISABI) of approximately 2%

When an LLC is the beneficiary, you can transfer ownership by selling the LLC's membership interests instead. The fideicomiso does not change — the same entity remains the beneficiary. Only the LLC's owners change. This can save:

• The trust modification fee ($2,500-$6,000)
• The SRE permit wait time
• Potentially the transfer tax (ISABI), depending on how the transaction is structured

The savings are most significant for family transfers — passing the property to your children, for example, by transferring LLC membership interests rather than modifying the fideicomiso. No trust modification, no SRE permit, no notario for the trust layer.

Important caveat: the underlying property still needs to be properly valued and any applicable capital gains tax (ISR) must be paid on the sale. The LLC structure does not eliminate tax obligations — it simplifies the trust mechanics.

Asset Protection Benefits

A properly structured LLC provides a layer of liability protection between the property and your personal assets. If someone is injured at the property and files a lawsuit, the LLC — not you personally — is the named defendant. Your personal bank accounts, other properties, and assets in the US are generally protected from judgments against the LLC.

For this protection to work, the LLC must be:

• Properly formed and maintained (annual filings, registered agent, operating agreement)
• Treated as a separate entity (separate bank account, no commingling of personal and LLC funds)
• Adequately capitalized (not a shell with zero assets — courts can "pierce the veil" of an undercapitalized LLC)

Wyoming and Nevada are popular formation states for their strong asset protection statutes, low fees, and privacy provisions. Wyoming, in particular, charges only $100 for formation and $60 per year for annual reports — making it the most cost-effective option for most Cabo buyers.

Tax Implications for US Owners

A single-member LLC is a "disregarded entity" for US federal tax purposes. This means the IRS treats it as if it does not exist — the property income and expenses flow directly onto your personal tax return (Schedule E for rental income, Schedule D for capital gains on sale).

This is good news for Cabo property owners because:

• The US-Mexico tax treaty applies the same way it would for individual ownership — avoiding double taxation
• No additional corporate tax return is required (no Form 1120 or 1120-S)
• FBAR and FATCA reporting for the fideicomiso is the same as for individual beneficiaries
• Mexican rental income taxes and capital gains taxes are handled identically

A multi-member LLC (two or more owners) is treated as a partnership for US tax purposes, requiring a Form 1065 partnership return and individual K-1 schedules for each member. This adds accounting cost ($500-$2,000 per year for the partnership return) but provides no additional asset protection benefit beyond the single-member structure. For married couples, a single-member LLC in a community property state can be owned jointly without triggering partnership treatment.

When the LLC Structure Makes Sense

• Investors with 2+ properties: One LLC per property keeps liabilities isolated. A lawsuit against Property A cannot reach Property B.
• Buyers planning family transfers: Passing the property to children or a trust is dramatically simpler through membership interest transfers.
• High-net-worth individuals: The asset protection layer is most valuable when there are significant personal assets to protect.
• Buyers in litigation-prone professions: Doctors, attorneys, contractors, and business owners who face elevated personal liability risk.

When to Skip the LLC

• Single vacation home for personal use: If you are buying one condo to use yourself a few times a year, the LLC adds cost and complexity with limited benefit. Homeowner's insurance and an umbrella policy provide adequate protection for most personal-use properties.
• Budget-conscious buyers: The incremental cost of LLC formation, maintenance, and legal setup ($500-$1,500 per year) may not justify the benefits for a property under $500,000.
• Buyers who will never sell or transfer: If you plan to hold the property for decades and have no estate planning motivation, the transfer flexibility benefit is moot.

How to Set Up the LLC-Fideicomiso Structure

1. Form the LLC in your chosen state (Wyoming is most common). Cost: $100-$800 depending on state. Timeline: 1-3 business days with online filing.
2. Draft the operating agreement. This is the LLC's governing document. For a single-member LLC holding Cabo property, a straightforward agreement is sufficient. Cost: $500-$2,000 with an attorney, or use a reputable formation service.
3. Apostille the formation documents. Mexico requires that US legal documents be apostilled (internationally certified) for use in the country. Your state's Secretary of State handles this. Cost: $50-$200. Timeline: 1-2 weeks.
4. Open the fideicomiso with the LLC as beneficiary. The trustee bank reviews the LLC documents, verifies the members, and establishes the trust. Cost: $2,000-$3,000 for the trust. Timeline: 45-90 days for a new trust.
5. Close on the property. The process proceeds identically to an individual purchase — the only difference is the LLC's name on the beneficiary line of the fideicomiso.

Total setup cost: approximately $2,500-$4,000 for LLC formation plus fideicomiso establishment. Get the structure right before you close — retrofitting an LLC as beneficiary after purchase costs $1,500-$3,000 for the trust modification alone.

Alternatives: SA de CV and Revocable Trust

For buyers who need more than an LLC provides, two other structures are worth considering:

Mexican SA de CV (corporation): A Mexican corporation can hold residential property directly — no fideicomiso required, even in the restricted zone. This eliminates the annual trust fee ($500-$1,200/year). But the SA de CV has its own overhead: formation costs ($3,000-$5,000), annual accounting and tax filings ($2,000-$5,000/year), and mandatory corporate governance requirements. The SA de CV makes sense for commercial properties, development projects, or portfolios of three or more residential properties. For a full breakdown, see our SA de CV guide.

US revocable trust: A US revocable (living) trust can also be the fideicomiso beneficiary. The primary benefit is estate planning integration — when you die, the property passes to your beneficiaries according to the trust terms, avoiding US probate. The revocable trust does not provide asset protection (because it is revocable, courts treat it as your personal property). Use this structure if estate planning is your primary motivation rather than asset protection or transfer flexibility.