[BUYING AND SELLING REAL ESTATE IN MICHIGAN]
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extent that it conflicts with the MRULPA. 2. In order to form an LP, a Certificate of Limited Partnership must be filed with the Michigan Department of Licensing and Regulatory Affairs (“LARA”). MCL 449.1201(a). 3. A LP must have at least one general partner and one limited partner. MCL 449.1101(8). General partners have managerial authority over the business. Limited partners are generally not liable for the obligations of the partnership, unless (i) the limited partner is also a general partner or, (ii) the limited partner takes part in the control of the business. MCL 449.1303(a). 4. Certain actions may require 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. An LP is a pass-through entity.
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, 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 an LLP have some liability protection, but not as much protection as limited partners in an LP. 3. Must file an application to register an LLP with LARA. D. LLCs 1. Governed by the Michigan Limited Liability Company Act, MCL 450.4101 et seq . An LLC must file
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
ILN Real Estate Group – Buying and Selling Real Estate Series
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