Which is the best kind of asset protection in real estate investing, illegal partnership, LLC, general or limited? Here’s some clarification around these titles.
There are two types of legal partnerships: the general partnership, and the limited partnership.
The general partnership shares all liabilities between partners. A limited partnership does limit liability for the partners involved and can be more effective. Because these partnerships limit liability there must be a general partner as well to assume the liabilities of both partners. This is why establishing an LLC as the general partner can provide that additional protection.
Generally, people devise a partnership for protection. Asset protection, streamlining your business or solidifying your relationship are good reasons to set up an LLC as a compliment or a substitute for the partnership. It’s important that your lawyer offers the best advice and information because every business and partnership may require different things.
A series LLC can replace a partnership and actually eliminate the need for a formal legal partnership. A series LLC’s parent-child structure is crucial to coordinating with partners and every series within that is a miniature LLC, which can have different operating agreements for each series. You can specify your partners and their roles by the asset. This allows the investor to build a strategy around the investment itself rather than the relationship with the partner.
Every business, asset, and partner are different so it’s important to understand your options and what’s better for you going forward with your investment. A series LLC may work better over a partnership and may be the smarter option for many cases. Coordinating partners through a series LLC is often easier and provides greater protection than a limited or general partnership. It also gives partners greater control.
For more information on general and limited partnerships or if an LLC seems to be the better way to go when investing in real estate either for residential or commercial opportunities, give me a call today.