ULI San Diego @ Lunch Presents:

Partnerships, Corporations, LLC's, et al: Sort Through The California Entity Mish-Mash

Presented by

Whitney Skala, Esq.

501 W. Broadway, Suite 1310San Diego, California 92101

www.skala-apc.comwhitney@skala-apc.com

619-573-9250Real Estate, Business, Entities

“Growing At The Speed Of Trust”

Strong Foundation

Strong Foundation

Strong Foundation

Who will benefit from today?

Investors Developers Brokers Bankers Architects Consultants Planners Attorneys Caterers

Sole Proprietorship

Start-up firm Small single-investor real estate

holding Fictitious Business Name (“DBA”) Business license Insurance!!! Schedule C tax reporting 1031 consequences Personal guarantees

General Partnership

Two or more partners May be used for any business Unlimited liability and apparent

agency Formal, informal, and inadvertent

formation Default rules unless agreement to

the contrary GP-1 Insurance!!! Mailbag: What’s a joint venture?

Entities of Limited Liability

Corporations Professional Corporations Limited Partnerships Limited Liability Companies Limited Liability Partnerships New California Entities

Corporations

Corporations

Creature of Statute (no informal or inadvertent formation)

One shareholder, one director; two shareholders, two directors; three or more shareholders, three directors (do you really want three directors?)

President, Secretary, and Treasurer By-laws, minutes, contribution of

initial assets

Corporation Mailbag (!)

“What’s a professional corporation?” “I’m a Sole Proprietor. At what point

should I incorporate?” “What’s an S Corp?” “Why Delaware?” “Ok, then why Nevada?” “Should I put real estate into my

corporation?” Shareholder Agreement; Buy-Sell

Agreement

Trivia Time: Who “wrote the book” in CA on Corporate Formation?

Answer …

Limited Partnerships

RE entity of choice prior to LLC’s Need a General Partner Limited Partners have limited roles:

“Nothing quite so limited as being a limited partner with George Steinbrenner”

LP-1 (which sometimes is recorded at the County)

Costs and Problems of Structure

Limited Liability Companies

1990’s Phenomenon (What’s “Belize”?)

Structure: Members, Manager(s) Added bonuses: Officers, Internal

investment flexibility, only need one owner

Limitation: Not for use for licensed professionals (But: Ok for contractors as of 2012)

Perceived weakness: Gross Revenues Fee

LLC’s in CA: Gross Revenues Fee

Total Income Fee Amount

$250,000-$4999,999 $900

$500,000-$999,999 $2,500

$1,000,000-$4,999,999 $6,000

$5,000,000 or more $11, 790

Time For Another Mailbag

Are contractors switching over to LLC’s?

Delaware LLC? Single-purpose LLC With LLC’s, is anyone using Limited

Partnerships anymore? What is a “Series LLC”?

Limited Liability Partnerships

Narrow Availability: Attorneys, Architects, CPA’s, Engineers, Surveyors

Primary Benefit: Liability of non-negligent partner is limited to interest in firm (after exhaustion of E&O insurance)

Formation with Secretary of State, but must then qualify with State Bar, Dept of Consumer Affairs, or State Board of Accountancy

New California Entities!

Flexible Purpose Corporation Benefit Corporation, aka, B

Corporation

Closing Thoughts

Legal Zoom Return to Three-Level Chess