USA - FLORIDA Law and Practice Contributed by: Jeffrey R Margolis, Marc S Shuster, James L Berger and Evan Rosenberg, Berger Singerman LLP
• joint estates – ie, tenancy in common, joint tenancy, and tenancy by the entirety (between spouses). 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity LLCs LLCs combine the opportunity for the liability protection of a corporation with the opportunity for tax classification as a partnership, with cer - tain reflective features. LLCs are also extremely flexible with respect to the management and governance structure, distribution structure (the distribution waterfall), and other transactional matters. For these reasons, LLCs are increas - ingly popular entities to effectuate real estate joint ventures and transactions. Ownership of an LLC is defined in terms of mem - bership, with “members” owning equity interests in the company. Advantages The advantages of an LLC are numerous and have made the LLC one of the most used own- ership vehicles for investing in commercial real estate and real property held for investment pur - poses. Disadvantages The flexibility in structuring and tailoring the organisational documents, operations and man - agement of an LLC truly limit disadvantages associated with this legal entity but there are certain drawbacks, including greater complex - ity and cost in preparing LLC agreements and related organisational documents, when com - pared to a corporate structure. Limited Partnerships A limited partnership is an association of two or more parties formed under the laws of any state
and consisting of at least one general partner (holding a general partnership interest) and at least one limited partner (holding a limited part - nership interest). Most states have adopted the Revised Uniform Limited Partnership Act (RUL - PA), which provides the statutory framework for limited partnerships. Advantages A limited partnership offers many of the same advantages as an LLC, including the combina - tion of the limited liability available to limited partners and the tax classification as a partner - ship. Traditionally under RULPA, limited partners did not become liable as general partners unless they took part in the “control of the business”. RULPA also provided certain rights that limited partners could exercise without taking part in the “control of the business”. Disadvantages Limited partnerships must comply strictly with the requirements of the state in which the lim - ited partnership is organised and operating. If the limited partnership is formed incorrectly, then the entity is treated as a general partnership for the purposes of liability, and limited partners may not be protected. Fairly recently, many states, including Florida, have sought to mitigate this issue, adopting statutes that authorise and provide for limited liability limited partnerships (LLLPs), which are limited partnerships (formed under the govern - ing limited partnership statute in the applicable state) that have elected LLLP status. General Partnerships A general partnership is an association of two or more persons to carry on as co-owners of a
1160 CHAMBERS.COM
Powered by FlippingBook