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interests in the real property, with rights of survivorship. B. Commercial property may be held as follows: 1. By an individual pursuant to the forms set forth in IV A. above (not recommended for liability purposes). 2. General Partnership (“GP”)/Joint Venture. 3. Limited Partnership (“LP”). 4. Limited Liability Partnership (“LLPs”). 5. Limited Liability Company (“LLCs”) (most common). 6. Corporation: (i) C corporation; or (ii) S corporation. V. TREASURY REGULATIONS A. Under Treas. Reg. §301.7701-1 et seq., corporations are always classified as corporations for federal income tax purposes. On the other hand, GPs, LPs, LLCs (with more than one member), and LLPs are classified as partnerships for federal income tax purposes, unless they elect to be taxed as corporations. B. C corporations are subject to a “double” income tax because they are taxed at the corporate level, and shareholders are taxed on the dividends they receive from the corporation. Subject to certain exceptions, S corporations are generally taxed only at the shareholder level. Partnerships and LLCs pass through their income and losses to the partners of the partnership. All entities except
for C corporations generally avoid double taxation.
VI. DISTINGUISHING FEATURES A. GP/Joint Venture
1. A partnership is an association of two or more persons to carry on as co-owners of a business for profit. MCL 449.6. A partnership is a distinct legal entity, separate from its owners. 2. GPs (sometimes referred to as copartnerships) generally must file a certificate of partnership in the county where the partnership conducts its business. MCL 449.101. 3. A joint venture is a partnership which is limited to a specific duration or scope. 4. GPs are governed by the Michigan Uniform Partnership Act, MCL 449.1 et seq. (“MUPA”). 5. Although not required by statute, it is strongly recommended that partnerships have a Partnership Agreement. A Partnership Agreement sets forth the duties and obligations of the partners towards one another and to the partnership. Absent a Partnership Agreement, the MUPA creates default rules governing the relationship between partners. For example, absent an agreement to the contrary, the MUPA provides that partners will share equally in the partnership’s profits and losses, and that all partners have equal rights in the management of the partnership. MCL 449.18 (a); MCL 448.18(e).
ILN Real Estate Group – Buying and Selling Real Estate Series
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