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Aurora Commercial Real Estate and Business Attorneys
What are the differences between a Limited Liability Partnership and a Limited Liability Company?
This article will discuss the differences between a Limited Liability Partnership and a Limited Liability Company.
Limited Liability Partnership aka LLP
A Limited Liability Partnership or otherwise known as an “LLP” is a business and corporate structure that provides asset protection and growth opportunities. A major reason to establish an LLP is to growth a business and provide a corporate governance structure for the high-growth real estate venture or company. Entrepreneurs and real estate ventures are high-growth, high-risk ventures, which require the expertise of lawyers and accountants.
General Partner vs. Limited Partner
An LLP is comprised of a general partner and limited partners. A general partner is the key entrepreneur or enterprise, which spearheads a commercial enterprise of limited partners. A limited partner is a business owner that acts an investor or key employee of a business. The benefit of the limited partner is they own a share of the commercial enterprise without the control and voting share of the general partner. A major benefit of a limited partner is limited liability protection. Essentially, a limited partner has much greater liability and asset protection than a general partner.
1031 Exchange Benefits: Protecting Real Estate Investor’s Gains From the IRS During the Sale of Property
In 2021, the median value of a home in the state of Illinois increased almost 50% from the median value in 2012. 10 years ago the median home value in Illinois was $157,000. In 2021 Zillow reported that number to be just under $230,000. Now, in 2022, that number has grown over 11% in just one year to over $267,000. The increasing home value is great news for real estate investors and owners of investment properties. However, the IRS (Internal Revenue Service) can and will go after a seller’s gains through taxes. A 1031 Exchange is one way that investors in real estate can avoid certain taxes by the IRS.
What is a 1031 Exchange?
A 1031 Exchange is a tool that real estate investors and owners of investment properties can use to protect their gains from the sale of property from being taxed by the IRS.
26 U.S. Code §1031(a)(1) states: no gain or loss is recognized if property held for productive use in a trade or business or for investment is exchanged solely for property of a “like-kind” which is to be held either for productive use in a trade or business or for investment.
Limited Liability Company (“LLCS”): The ins and Outs of LLCs
A Limited Liability Company is a hybrid between a Corporation and a Partnership. A Partnership is when two or more people join together to establish a business. The benefit of a partnership is the flexibility of business arrangements. A partnership can be any written benefit that two or more people envision. The drawback to a partnership is the lack of limited liability protection. The benefit of a corporation is the separation between a person’s assets and business liabilities. A Corporation provides limited liability protection for their owners or otherwise known as “shareholders.”
1. Limited Personal Liability
In this article, we will examine the benefits of LLCs. The first major benefit that we will discuss is limited liability protection. Prior to incorporating a business, many entrepreneurs are sole proprietorships or partnerships. Generally, establishing an LLC is a sign of maturity in business. Limited personal liability is the benefit of limiting the business liabilities to the business (or LLC). An LLC creates a separate legal entity, which is distinct from its’ owners. As a separate legal entity, the business owners and its’ personal liabilities are distinct from the business.
Legal Considerations When Selling Commercial Real Estate
The first step in the sale of commercial real estate property is the execution of the Commercial Sales Contract. The Mainstreet Organization of Realtors is the main (but not the only) contract for commercial real estate deals.
Attorney Review Period
The first step in the sale of a commercial real estate purchase or sale is negotiation of the attorney review period. The attorney review period is Paragraph 6 of the Commercial Sales Contract. Paragraph 6, Attorney Review Period, is the ability of either the buyer or seller’s real estate attorney to approve the contract; disapprove the contract; and/or propose modifications to the contract except for purchase price. Business negotiations must be finalized within ten business days after acceptance of the contract by the Seller(s).
In most buyer’s attorney’s attorney review contract, there is a phrase about extending the attorney review period until an agreement is reached or either party disapproves of the contract. Therefore, the 10-business day deadline is often repealed.
Selling Or Buying a Franchise Business
Oswego and Kendall County Franchise Business Attorneys
The purchase or sale of a franchise is a major investment transaction. The process is complex and requires varying different legal documents, which require precision and understanding. The first step in the sale and purchase of a franchise is the letter of intent.
Letter of Intent Attorney in Kendall County and Nearby Areas
The Letter of intent or “LOI” is necessary for several reasons:
- The Letter of Intent guarantees the franchise will be sold to the agreed buyer even if other potential buyers appear in the future. Thus, the LOI restricts the business deal between the buyer and seller.
- The Letter of Intent shows seriousness by the Buyer and usually will include earnest money or a down payment evidencing their seriousness.
- The Letter of Intent is the first step in consummating a business deal for the franchise purchase or sale.
Formation of LLCs for Multi-Unit Buildings and Property Ownership
Forming an LLC or otherwise called a Limited Liability Company in Illinois is a wise decision. The first step in filing an Articles of Organization, which is the official process to become an Illinois LLC is to pick a business name. An LLC’s business name must be different and distinguishable from other LLCs and Corporations registered with the Illinois Secretary of State.
Differing business names reduces confusion and promotes accountability. Under Illinois law, the LLC must end with LLC, L.L.C. or Limited Liability Company. There are advantages of forming an LLC. These advantages include the following:
· Limited Protection for the Business Owners
· Taxation Flexibility and Savings
· Cost-Effective to Start
· Creditability
Questions?
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