1031 Exchange Question -

[Rich Solano]

Hypothetical 1031 Exchange question here for one entity with multiple members: 

If you have an LLC with three people in it holding a rental and all partners decide / agree / vote to sell... Would I be able to take my proceeds and 1031 them into a different asset outside of the entity (that owns the rental)? I have heard different answers... One being that you are only able to utilize the entity itself to roll the entirety of the proceeds into a new asset... which is not the ideal scenario.

[Jon Taylor]

Based on what you described the LLC is likely the tax-payer on title. *(If the LLC distributes K-1s to the managers, this confirms my assumption). In this scenario, each member doesn't actually own real estate, they own a business (that owns real estate).
If that is the case you have two options: 

1) The LLC performs the 1031 exchange and continues to achieve the goals of the managers through changes or details added to the operating agreement and subsequently consider dissolving the LLC.

2) You dissolve the LLC and reform as Tenants in Common *prior* to the sale of the property. This allows each "member" to have autonomy when the property is sold. It's wise to do this well before you sell the property.