Typical Ownership Structures
Individual Ownership
• Unmarried Person - a person that is now not married but was once married (e.g., widowed, divorced).
• Single Person - a person that is now not married and was never married.
• One-Settlor "Living" Trust - a revocable trust established by an individual (may be single, unmarried, or married individual).
• Two-Settlor "Living" Trust - (typically) a joint revocable trust established by a married couple owning (typically) community property of the couple, or seperate property of either spouse.
• Single Member Limited Liability Company
("LLC") - disregarded
for federal income tax purposes (typically husband and wife ownership
is considered single member absent an election to the contrary).
Joint Ownership
• Tenant-In-Common ("TIC") Ownership - two or more owners (each owner may be an individual, trust, corporation, partnership, LLC, etc.); most favorable form of ownership in anticipation of future 1031 exchange where each owner "goes his/her own way" upon property sale; least attractive feature: each owner may sell or mortgage his/her fraction share without consent of the other owners.
• LLC with Two or More Owners (husband and wife joint ownership
is not generally considered two members)- sometimes unfavorable form
of ownership in anticipation of future 1031 exchange because each owner
may not "go his/her own way" upon property sale absent special
permission from other owners and other consideration; on the other hand:
owners may restrict or forbid sale or pledge of an owner's fractional
share in an LLC. Generally, LLCs with two or more members are taxed like
a partnership, with partnership tax return, "K-1" schedules,
etc.
• Limited Partnership and General Partnership - forms may be applicable in certain circumstances, but largely out-moded by LLC form; partnerships are generally two or more partners. "Limited" partnerships include at least one general partner and one limited partner. "General" partnerships include at least two general partners and no limited partners. Liability of "limited" partners is generally limited to dollar investment; liability of general partners is generally unlimited; contrast with limited liability (generally) managing member of LLC. In either general or limited partnership, partners may restrict or forbid sale or pledge of a partner's fractional share in the partnership, like that restriction of an LLC.
• "C" Corporation - rarely advisable for real estate because of double taxation potential for corporation or shareholder.
• "S" Corporation - sometimes used but not generally
advisable for real estate advice of qualified tax attorney or CPA.
The above information is not legal, tax or accounting advice. The above
information is provided by G. Scott Haislet, tax attorney and 1031 exchange
intermediary; telephone number 925-283-1031, and is given with the understanding
that readers must consult a qualified advisor about their particular
situation.
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