[BUYING AND SELLING REAL ESTATE IN THE UNITED STATES - MICHIGAN]
obligation, or other liability of the registered LLP. MCL 449.46(1). However, a partner in a registered LLP will be liable for the partner’s own negligence, wrongful acts, omissions, misconduct, or malpractice, or that of any individual who is under the partner’s direct supervision and control, that results in a debt, obligation, or other liability of the registered LLP. MCL 449.46(2). 2. Partners in a LLP have some liability protection, but not as much protection as limited partners in a LP. 3. Must file an application to register a LLP with LARA. D. LLCs 1. Governed by the Michigan Limited Liability Company Act, MCL 450.4101 et seq . A LLC must file Articles of Organization with LARA. MCL 450. 4202. 2. LLCs are very flexible and can be tailored to the needs of the members. LLCs can be member- managed or manager-managed. Profits, losses, and distributions can generally be divided in any manner agreed upon by the members with certain restrictions. 3. LLCs receive pass through income tax treatment unless the LLC elects to be taxed as a corporation or is a disregarded entity. 4. A written Operating Agreement is unnecessary, but strongly recommended. This document describes how the LLC will be
approval of the limited partners. 5. A written limited partnership agreement is not required but strongly recommended. 6. Advantages 1. The limited partners of the partnership have limited liability. MCL 449.1303(a). 2. A LP is a pass-through entity. The
LP passes through its profits and losses to the partners and there is no entity level income tax.
7. Disadvantages 1. Full liability for general partners, however, a limited liability entity, such as an LLC or a corporation, can serve as a general partner. MCL 449.1403. 2. A limited partner who takes part
in the control of the business may be subject to unlimited liability. MCL 449.1403(a). A limited partner who “knowingly permits his or her name to be used in the name of the limited partnership”, except under certain circumstances permitted by statute, is liable to creditors of the LP, provided that the creditors do not have actual knowledge that the limited partner is not a general partner. MCL 449.1303(d).
C. LLP 1. Similar to GPs, except with more limited liability for partners.
Specifically, except for certain carve outs, a debt, obligation, or other liability of a LLP is solely the debt,
ILN Real Estate Group – Buying and Selling Real Estate Series
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