whitney skala ppt for urban land inst on mar 6, 2012
DESCRIPTION
This PPT was part of my hour and a half presentation to the San Diego chapter of Urban Land Institute. The subject was entity formation for real estate investors, developers, and service providers.TRANSCRIPT
ULI San Diego @ Lunch Presents:
Partnerships, Corporations, LLC's, et al: Sort Through The California Entity Mish-Mash
Presented by
Whitney Skala, Esq.
501 W. Broadway, Suite 1310San Diego, California 92101
619-573-9250Real Estate, Business, Entities
“Growing At The Speed Of Trust”
Strong Foundation
Strong Foundation
Strong Foundation
Who will benefit from today?
Investors Developers Brokers Bankers Architects Consultants Planners Attorneys Caterers
Sole Proprietorship
Start-up firm Small single-investor real estate
holding Fictitious Business Name (“DBA”) Business license Insurance!!! Schedule C tax reporting 1031 consequences Personal guarantees
General Partnership
Two or more partners May be used for any business Unlimited liability and apparent
agency Formal, informal, and inadvertent
formation Default rules unless agreement to
the contrary GP-1 Insurance!!! Mailbag: What’s a joint venture?
Entities of Limited Liability
Corporations Professional Corporations Limited Partnerships Limited Liability Companies Limited Liability Partnerships New California Entities
Corporations
Corporations
Creature of Statute (no informal or inadvertent formation)
One shareholder, one director; two shareholders, two directors; three or more shareholders, three directors (do you really want three directors?)
President, Secretary, and Treasurer By-laws, minutes, contribution of
initial assets
Corporation Mailbag (!)
“What’s a professional corporation?” “I’m a Sole Proprietor. At what point
should I incorporate?” “What’s an S Corp?” “Why Delaware?” “Ok, then why Nevada?” “Should I put real estate into my
corporation?” Shareholder Agreement; Buy-Sell
Agreement
Trivia Time: Who “wrote the book” in CA on Corporate Formation?
Answer …
Limited Partnerships
RE entity of choice prior to LLC’s Need a General Partner Limited Partners have limited roles:
“Nothing quite so limited as being a limited partner with George Steinbrenner”
LP-1 (which sometimes is recorded at the County)
Costs and Problems of Structure
Limited Liability Companies
1990’s Phenomenon (What’s “Belize”?)
Structure: Members, Manager(s) Added bonuses: Officers, Internal
investment flexibility, only need one owner
Limitation: Not for use for licensed professionals (But: Ok for contractors as of 2012)
Perceived weakness: Gross Revenues Fee
LLC’s in CA: Gross Revenues Fee
Total Income Fee Amount
$250,000-$4999,999 $900
$500,000-$999,999 $2,500
$1,000,000-$4,999,999 $6,000
$5,000,000 or more $11, 790
Time For Another Mailbag
Are contractors switching over to LLC’s?
Delaware LLC? Single-purpose LLC With LLC’s, is anyone using Limited
Partnerships anymore? What is a “Series LLC”?
Limited Liability Partnerships
Narrow Availability: Attorneys, Architects, CPA’s, Engineers, Surveyors
Primary Benefit: Liability of non-negligent partner is limited to interest in firm (after exhaustion of E&O insurance)
Formation with Secretary of State, but must then qualify with State Bar, Dept of Consumer Affairs, or State Board of Accountancy
New California Entities!
Flexible Purpose Corporation Benefit Corporation, aka, B
Corporation
Closing Thoughts
Legal Zoom Return to Three-Level Chess