Faced with the risk of unjust lawsuits, the need to interact with other institutions yet remain separate, the policy of empowering many individuals rather than central control it is crucial that you do not own real property in your own name or as a group.
There are several ways in which an individual can hold property. These include as a corporation, limited partnership, limited liability company (“LLC”), trust, and many others.
The Title Holding Trust or Land Trust is a device for acquiring, holding, managing and selling real estate for a purpose.
Title to real estate is held by the Trustee (Exeter Fiduciary Services, LLC) pursuant to a California Title Holding Trust or Florida Land Trust Agreement etc.. However, the use and enjoyment of the property, or beneficial use, is retained by the beneficiary (owner) of the Title Holding Trust or Land Trust. This is where the importance of Christ's purpose plays an important role.
While there are many options, when it comes to real estate investment, LLCs are the preferred entity by most investors, attorneys and accountants. LLCs appear to be the best of all worlds for holding investment real estate. Unlike limited partnerships, LLCs do not require a general partner who is exposed to liability. Instead, all LLC owners -- called members -- have complete limited liability protection. LLCs are also superior to C corporations because LLCs avoid the double taxation of corporations, yet retain complete limited liability for all members. Furthermore, LLC’s are rather cheap and easy to form.
Having a separate LLC own each separate property prevents "spillover" liability from one property to another.
Limited Liability Company
An LLC is a business entity created under state law by filing articles of organization with the state secretary of state. Although an LLC is similar to a corporation and is designed as a vehicle for operating a business, operating an LLC requires far fewer legal formalities (such as the appointment of a board of directors) than a corporation does. In every state, a single member may form an LLC and then gift or sell property to it. You may gift the same type of property to an LLC that you can gift to an irrevocable trust. As stated a LLC does not need to be organized for profit and is not a corporation. Also an LLC may be used concurrently with a trust to provide the best protection and estate treatment.
One theory is that "the owner should hold the investment property in a single member LLC, with the living trust as the sole member of the LLC." In this case the trust is the owner of the company and holds all of the interests of the LLC. This form of ownership gives an added layer of protection from the LLC as well as the additional estate planning benefits of a trust.
One of the benefits of the LLC format is its status as an independent legal entity that can also be owned and managed by other independent entities that are considered "legal persons" under the law. This feature is analogous to the ability of different types of legal constructs to buy and hold stock in a corporation.
As a member of the LLC, a trust can be a managing member. Functionally, the trustee of the trust would assume the operational responsibilities on behalf of the trust entity. A trust can also be the sole member and the sole managing member of an LLC or a manager may be elected by the sole member trust.
In another scenario assets are owned by a Limited Liability Company and in turn the shares of the membership units of the LLC are owned by an irrevocable trust. A Trust written as an irrevocable trust to empower the people as trustees so that they may fulfill the purposes of another would serve someone as beneficiary. A trust can hold an LLC or multiple LLCs.
The difference between revocable and irrevocable is in the former the Grantor, the Trustee, and the Beneficiary are generally the same person. The Grantor did not give-up control of the asset(s) entirely.
In the latter the Grantor no longer owns the assets. Assets have been transferred to the control of the Trustee who has a fiduciary duty to manage the assets for the benefit of all beneficiaries, which may include the Grantor. The trustee must demonstrate No private advantage and in the best interests of beneficiaries and they must act prudently and will be liable for breach of trust if, by failing to exercise proper care, the trust fund suffers loss. Failure to exercise the requisite level of care will constitute a breach of trust for which the trustee will be liable to compensate the beneficiaries. This duty can extend to supervising the activities of a company in which the trustees hold a controlling interest.
An irrevocable trust can be treated as a simple, complex, or grantor trust, depending on the powers listed in the trust instrument. A revocable trust may be revoked and is considered a grantor trust . State law and the trust instrument establish whether a trust is revocable or irrevocable. If the trust instrument is silent on revocability, then most states consider the trust revocable.
So with that in mind there is some issue with the structure of a trust and its use of an LLC but there are also advantages.
An agent for service of process is a person designated by the company to accept the delivery of legal papers for a lawsuit.
- Each LLC must have a registered agent who must be either: (1) an adult living in the state of formation with a street address (P.O. boxes are not acceptable); or (2) a company registered with the Secretary of State in the state of formation.
- Many people choose to form LLCs in their home state. The advantages of forming an LLC in your home state is that any of the members, managers or officers can act as the registered agent. The LLC will not need to register as a "foreign LLC" if it does business in its home state.
A "member" is an owner of the limited liability company (much like shareholders are to a corporation). A member has a bundle of rights in the company known as a "membership interest." These rights include the rights associated with ownership.
An operating agreement is any agreement, written or oral, between all of the members as to the affairs of a limited liability company and the conduct of its business in any manner not inconsistent with law.
The organizer is the person who signs the articles of organization. The organizer does not need to be a member or manager of the limited liability company - it may be any person or entity.
The "Articles of Organization" is that document that, when filed with the Secretary of State, causes the limited liability company to come into existence.
- States often have a prescribed form for the Articles of Organization.
- The Articles of Organization must indicate whether the LLC will be managed by its members, or by managers.
- The Articles of Organization should indicate who the company will be managed by. If management is to be by members they will participate in managing the business and affairs of the company.
- Whether management is by members or managers it should be by written consent. The "majority" is not by number of people, but by percentage of interests.
Name the LLC according to the following rules:
- Must end with the words "Limited Liability Company," "Ltd. Liability Co." or the abbreviation "LLC" or "L.L.C.
- May not use a name that is already in use, or that is similar to a name in use.
- May not contain the words: "bank," "trust," "trustee," "incorporated," "inc.," "corporation," or "corp."
- May not contain the words "insurer" or "insurance company" or or one suggesting it is assuming insurance risks.
A contribution of initial capital is what each member will "put-in" at the start to get the company started which may be in money, property, or services, or other obligation to contribute money or property or to render services.
An "Economic Interest" means the right to share in the income, gains, losses, deductions, credit or similar items but does not include any other rights of a Member, including the right to vote or to participate in management==Footnotes==
- The complex trust is one that contains provisions for charitable gifts, an income stream, or concerns other types of wealth distribution.