[BUYING AND SELLING REAL ESTATE IN MICHIGAN]
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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 managed and operated. Operating Agreements can be drafted in a manner that best suits the needs of the company and its members. 5. Advantages 1. Unless otherwise provided by law or in an operating agreement, the members and managers of an LLC have limited liability. MCL 450.4501(4). 2. There is no entity level income tax on an LLC. The profits and losses of the partnership are passed through to the members. 3. LLCs have fewer statutory requirements than a corporation and are generally more flexible. 4. There are very few statutory
as complex as the member’s desire. However, Operating Agreements generally cover issues like management,
membership, income or loss allocations, cash and property distributions, mandatory and permissive capital contributions, dilution, and transferability of ownership, among others. 5. The Operating Agreement can limit or eliminate the duties members owe to each other. 6. Disadvantages 1. In order to enjoy some of the
benefits of a LLC, the members must create a tailored operating agreement. A knowledgeable attorney should be retained to draft a complex operating agreement.
E. Corporations 1. A corporation is a statutory entity. Corporations are governed by the Michigan Business Corporation Act, MCL 450.1101 et seq . 2. Corporations must file Articles of Incorporation with LARA. MCL 450.1202 et seq . 3. A “C” corporation is subject to double income taxation. It is taxed at the entity level, and then the shareholders are taxed on dividends. 4. An “S” corporation passes through income and losses pro rata based on ownership . S corporations are generally not taxed at the entity level. S corporation status requires: 1. Election by all shareholders.
requirements concerning what must be contained in an Operating Agreement. Operating Agreements can be as simple or
ILN Real Estate Group – Buying and Selling Real Estate Series
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