USA – SOUTH CAROLINA Law and Practice Contributed by: Matt Norton and Christian Kolic, K&L Gates
4.7 Enforcement of Restrictions on Development and Designated Use Restrictions on development and the designated use of property are generally enforced at the per - mit level; land disturbance and building permits are denied if the proposed project is not con - sistent with applicable restrictions. Certificates of occupancy may be denied for the same rea - son. Restrictions on use and the development of property may also be enforced by both the local governmental authorities and the public by way of legal proceedings seeking to enjoin the unau - thorised use or development of the property. 5. Investment Vehicles 5.1 Types of Entities Available to Investors to Hold Real Estate Assets Title real estate can be held by any legally rec - ognised entity having a separate legal exist - ence, including partnerships, limited partner - ships (LPs), limited liability companies (LLCs), corporations and statutory trusts. Title can also be held by trustees under common law trusts. The type of entity most frequently used to hold title to real estate is the LLC. LPs are also fre - quently used. The use of corporations and partnerships as title-holding vehicles is less common. 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity Limited Liability Companies (LLCs) LLCs provide limited liability protections – mem - bers and managers are not liable for debts of the LLC. LLCs have great flexibility with respect to: • management and control options; • allocations of profits, losses and other tax attributes among the members;
• distributions among the members; and • limitation of duties owed by members to each other and to the LLC. In some states, creditors of individual members may only reach the distributional interest of that member and not the member’s actual limited liability interest; to this extent, an LLC may pro - vide limited asset protection benefits. Single-member LLCs are generally ignored for income tax purposes, with taxation occurring at the parent/owner level. Multiple-member LLCs are typically taxed as partnerships. As a result, the LLC is a pass-through entity for tax purposes – taxation is at the member level and not the entity level. LLCs may, however, elect to be taxed as C corporations under the Internal Revenue Code, such that tax is also levied at the entity level. Partnerships Partnerships are similar to LLCs, but they have a significant disadvantage: the individual part - ners are jointly, or jointly and severally, person - ally liable for the debts and obligations of the partnership – there is no limited liability. Thus, a partner in a partnership may have liability greatly exceeding the amount of the partner’s invest - ment in the partnership. Limited Partnerships (LPs) An LP is similar to a partnership, but it must have at least one general partner and one or more limited partners. Although the general partner is fully liable for the debts and obligations of the LP, the limited partners’ liability is limited to their investment in the LP. As an LP is able to offer limited liability to its partners, it is a commonly used vehicle when there are multiple third-party investors.
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