Protection of Your Investment, Easy Allocation of Contributions of Partners–It is extremely hard to beat the “Limited Liability Company”

Anyone who owns a business venture should be concerned with certain basic truths.  It is a sad but true fact that our society is becoming more and more litigious every day, and more and more small business owners are finding themselves on the wrong side of law suits.  Right or wrong, the experience of defending a legal action is extremely stressful inflatable horse.

I have acted as a Massachusetts real estate attorney for more than 40 years. During that period, I have never had a client who “enjoyed” being sued and experiencing the expense and disruption of a lawsuit.  It makes sense to put a legal shield between yourself and the creditors of your business, whether real or contingent.  The  Limited Liability Company (“LLC”) is an entity completely separate from its members.

With proper planning, none of the members of the LLC should be personally liable for the debts of the LLC whether they arise in contract or tort. The LLC also offers some unique advantages for unmarried coupleswho own real estate together. This has been a subject of a recent post in which ActiveRain member showed much interest

The operating agreement of the LLC can be tailored to determine an “exit strategy” should the couple break up.  More importantly, the operating agreement can be fashioned in such a way as to recognize disparate contributions of equity or disparate payments on the mortgage, so there can be no problems sorting our who owns what and who is entitled to what tax deduction.  In many instances, the LLC can replace the use of joint tenancy agreements and tenancy in common agreements, which are often cumbersome and difficulty to administer and enforce.

Do you need to raise money for a real estate or venture capital project?  The LLC is a perfect vehicle.  Admitting new members is a simple process, and there are no limits to the number and/or character of additional investors.  They can include all types of individuals, corporations, trusts, pension plans, foreign investors (both out of Massachusetts and out of the country).  This is certainly not the case with the corporate structure that most closely rivals the LLC, the subchapter S corporation.

So, if your real estate transaction involves any group of people other than a married couple, I would strongly suggest an LLC. The planning, and protective, possibilities are endless, and the actuak working of the LLC easy to master. In the near future, my website, will contain examples  of many different types of Operating Agreements. I am sure you will find one among that group which can be adapted to fit your unique needs.

What Does It Cost?

The cost to set up and maintain an LLC are roughly comparable to setting up a corporation, (figure between $1,500 and $2,000 including filing fee and drafting of the articles of organization and operating agreement).  After the initial cost, however, the ongoing costs are minimal.  There is no need to hold an annual meeting of shareholders or directors.  The person designated as “manager” in the articles of organization can take actions on behalf of the entity without the approval of directors.  Moreover, in a single member LLC,  we at Topkins & Bevans have determined that there is no need for an operating agreement, so that the initial cost in that scenario is lower.

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