Flashcards in Unit 5 - part 3 Deck (8):
What types of ownership of RE by business organizations exist?
3. limited liability companies
What is a partnership? And limited partnership?
A partnership is an association of two or more persons who carry on a business for profit as co-owners.
In a general partnership, all the partners participate in the operation and management of the business and share full liability for business losses and obligations.
A limited partnership consist of one or more general partners, as well as limited partners. The business is run by the general partner(s). The limited partner is legally not permitted to participate, with the result that each can be held liable for business losses only to the amount invested.
What is a corporations?
A corporation is a legal entity - an artificial person - created under the authority of the laws of the state from which it receives its charter.
A corporation is managed and operated by its board of directors, who are selected by the owners of the corporation - it's shareholders.
Because the corporation is a legal entity, it can own RE in severalty or as a tenant in common.
As a legal entity, a corporation continues to exist until it is formally dissolved. The death of one of the officers or directors does not affect title to property owned by the corporation.
What is limited liability company (LLC)?
An LLC combines the most attractive features of limited partnerships and corporations. The members of LLC enjoy the limited liability offered by a corporate form of ownership.
In addition, the LLC offers the tax advantages of a partnership - income flows directly to the member of the LLC, instead of being subject the double taxation of a corporation, with income taxed when received by the corporation, and than taxed again when received as dividends by the shareholders.
LLC offers a flexible management structure without complicated requirements of a corporation or the restrictions of a limited partnership.
What types of property ownership exist?
1. condominium ownership
2. cooperative ownership
3. time-share ownership
What is characteristic of condominium ownership? And right of first refusal?
The owner of each unit holds a fee simple title to the unit. Any type of ownership can be used. Owner owns a share in common elements.
The unit can usually be sold or transferred to whomever the owner chooses, unless the condominium association provides for a right of first refusal. In that case, the owner is required to offer the unit at the same price to the other owners in the condominium or the association before accepting an outside purchase offer.
The condominium property is administered by a homeowners association (HOA), which is made up of unit owners. The association may be governed by a board of directors or another elected entity, and it may manage the property on its own or hire a property manager.
The association is responsible for the maintenance, repair, cleaning... and it must maintain fire, extended coverage and liability insurance.
The expenses of maintaining and operating the condominium building are paid by the unit owners collected by HOA as recurring fees or HOA fees.
What is characteristic of cooperative ownership?
In a cooperative, a corporation holds title to the land and the building. The corporation than offers shares of stock to prospective tenants. The price the corporation sets for each apartment becomes the price of the stock. The purchaser becomes a shareholder in the corporation by virtue of stock ownership and receives a proprietary lease to the apartment for the life of the corporation.
Because stock is personal property, the cooperative tenant-owners do not own RE, as the case with condominiums. Instead, they own and interest in corporation that has only one asset: the building.
The operation and management of a cooperative are determined by the corporation's bylaw. The shareholders of cooperative, elect officers and directors who are responsible for operating the corporation.
An important issue in most cooperative is the method by which shares in the corporation may be transferred to new owners (for example, approval of the board of directors, or that owner must sell the stock back to the corporation at the original purchase price).
Unlike a condominium association, the burden of any default payment in a cooperative falls on the remaining shareholders. Each shareholder is affected by the financial ability of the others. If the corporation s unable to make mortgage and tax payment because of shareholder defaults, the property might be sold by court order in a foreclosure suit. This would destroy the interest of all shareholders, including those who have paid their assessments.