A standard private equity fund would be a C or S corporation. Why? Because of liquidity. Valuing the entity based upon the assets it manages or holds, passes value to the shareholders. This is not the case with L.L.C's, or L.L.P's where value, where liquidity, and thus financing is more difficult due to legal components. If, for instance you hold all of the properties in one L.L.C, or L.L.P, were a tenant to sue you regarding an occurrence that took place in one of the building assets, he or she could lay claims to all of the other buildings under its corporate umbrella. Each building should have its own separate corporation, and even business checking account. Finally, all of these small corporations can then be placed under a C or S corporations' protection for the purpose of bringing in equity partners. Remember, they like the C and S corp, because of its legal freedoms, and would be enticed by your separating all of your apartment buildings as their own L.L.C subsidiaries, protecting the portfolio as a whole, from the liabilities of any one building. You can also use the L.L.P to hold the subsidiaries, as it allows you to function as a general manager, as well as a stake holder. This is also true with an L.L.C. You may wish to setup a for fee, or free consultation with a corporate and tax attorney to see just how the myriad of strategies can be honed to fit your investment criteria.
Nov 30, 2010