Business Entities - SEC Registration??

[John Graham]

If I were to create a firm (an LLC) that wanted to buy real estate in. Limited Partnerships are generally seen as the go-to business entity for tax and liability purposes. Naturally, the LLC would charge management fees as the general partner but would I (or the firm) need to register as investment advisor with the SEC to charge and collect those management fees?

I know for any of this I will use any attorney but I was just curious if anyone knows offhand.

Thanks!

[Jon Holdman]

Not an attorney. You might want to see one. SEC registration (and state, too) is relevant when you're taking on investors. If you're just creating an LLC to use your own money and credit to buy properties, then, no securities registration is needed. If you are going to be taking investors money, then you definitely need a securities attorney (and a pot of cash to pay for him or her.) Registration is one step, but there are a number of others.

Note a couple of things, though. For one, an LLC is usually a pass through entity that has no tax effects whatsoever. You can elect to be taxed as an s-corp, which may make sense if you're doing fix and flips. Not for buy and hold, though. Second, if you want the LLC to own the properties, getting loans is a more difficult process. For the most part, 30 year fixed loans are limited to individuals, so you will need commercial loans. And you probably will have to give a personal guarantee.

An LLC and a limited partnership aren't exactly the same thing. Commonly, though, these days LLCs are used where a limited partnership might have been used in the past.