Unit 2
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Eastern Gateway Community College *
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201
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Law
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Jan 9, 2024
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docx
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Uploaded by ProfRiverAlligator21
Lindsie Nygaard
Instructor Herbst
PLG 201
August 27, 2023
Unit Two: Concurrent Ownership
When individuals come together to form a business, the business, or
property, is typically owned by a legal entity. There are four main types of
legal entities. The four types are corporations, general partnerships, limited
partnerships and limited liability companies. When deciding which type of
entity to use, it is important to consider the advantages and disadvantages
of each specific type.
The following information was gathered from the textbook, Practical
Real Estate Law by Daniel F. Hinkle.
A corporation is a legal entity where the owners do not have any
personal liability in debts or actions of the entity.
(Hinkel, 2021) The legal
entity is split into shares, which are fractions of the business. The
shareholders are the owners of the company. The advantages of a
corporation would include the fact that the owners have no personal liability
for the debts. The owners/ shareholders can sell their portion, or shares, of
the entity, if necessary. A disadvantage is that the business is governed by a
board of directors, who authorizes major decisions. This offers less freedom
than some would prefer.
A general partnership is an association between two or more people.
(Hinkel, 2021) The owners are known as partners. The major disadvantage of
a general partnership is the fact that there is no limited liability to the
owners/ partners. However, the partners may deduct any losses from their
individual tax returns, which is an advantage. Partnerships are easier to form
than most other types of entities. A partnership can even be formed without
a written agreement.
Limited partnership is made up of general partners and limited
partners. General partners have full liability. Limited partners have limited
liability. (Hinkel, 2021) Limited partnerships are governed by the partners,
themselves, and have full authority to act on behalf of the partnership. A
disadvantage would be that the Uniform Limited Partnership Act does require
a formally written agreement and certain documents must be filed with the
secretary of state.
Limited liability companies appear to be the best of both worlds. They
offer the tax advantages of a partnership and the limited liability of a
corporation. (Hinkel, 2021) They are managed by the members. Because
limited liability companies are formal companies, documents must be filed
with the secretary of state.
When going over these options with the client, the client needs to be
fully aware of each type's advantages and disadvantages. The client should
take into consideration if they wish to answer to shareholders or to
themselves. They should consider how much personal liability they are
willing to put into the entity and they should consider how easily they want it
to be to establish or dissolve the business.
Citations
Hinkel, D. F. (2021). Concurrent Ownership. In
Practical Real Estate Law
(pp.
36–37). essay, Cengage.
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