Structure for Success

Real estate investors and developers are often well versed in assessing properties, analyzing cap rates, zoning issues, property tax concerns and other matters related to real estate due diligence. Yet they often overlook, or give little importance to, the structure of their business and the framework they establish for the ownership of the properties they acquire and sell.

The options can range from sole proprietorships to partnerships, corporations or limited liability companies – and within those categories, there are a wide variety of other possibilities.

Choosing between them depends on many factors — number and nature of interested parties, number of properties owned, the type of properties owned, the holding periods anticipated, the need for financing and the type of financing anticipated, along with a huge host of other concerns.

From both a tax and liability perspective, you might consider a limited liability company (an “LLC”) as your starting point. But even knowing that you want to form an LLC is not the end of the inquiry – it can be just the beginning.

Will it be organized in Illinois? It is common, particularly in commercial real estate deals, for a lender or investor to require organization in another state such as New York or Delaware. Or is a Series LLC a better fit? A Series LLC allows for the separation of property ownership into separate LLCs, which allows for segregation of liability and management, but under the umbrella of a “master” LLC.

The myriad options, and intricacies within them, can feel overwhelming. And giving short shrift to the form of business entity you choose for your business can be very costly.

For twenty-five years, Erwin Law has been helping its real estate investor and developer clients successfully sort through in the ins and outs of these and other integral business issues. For more information visit http://erwinlawfirm.com or call (773) 525-0153.