[BUYING AND SELLING REAL ESTATE IN MICHIGAN]
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1. Tenants in Common. Tenants in common each hold a separate and distinct interest in property but share a right of possession. There is no right of survivorship. In other words, if property is owned by two individuals, and one individual dies, the deceased’s interest reverts to his or her estate, and not the other owner. 2. Joint Tenants. Joint Tenants hold equal and undivided interests in property, with a right of survivorship. In other words, if property is owned by two individuals, and one individual dies, the deceased’s interest reverts to the other owner of the property. 3. Tenants by the Entirety. A married couple can hold real property as tenants by the entirety, where each spouse holds equal and undivided 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”).
ILN Real Estate Group – Buying and Selling Real Estate Series
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