Holding Title to Commercial Property 101
As a Chicago attorney, I get a lot of questions about the best way to hold title to commercial property; we will go through your options and together figure out the best solution for your (and your business’s) unique situation.
- Should I own commercial property in my name?
- Having a title to property in your name is typically not ideal for commercial property because it does not offer liability protection. For example, if someone is injured in the property they could sue you individually and your personal assets would be at risk. Some may say that a good insurance policy is sufficient, but from my point of view the more protection for your personal assets, the better.
- Should I form a Corporation or an LLC to hold the property? What is the difference?
- Forming a corporation or LLC does provide liability protection and has the added value of providing various tax benefits. Often people ask what are the main differences between forming an LLC and forming a corporation.
- LLCs require less formalities, are easier to maintain, good for holding property, and great for small/family owned businesses. An LLC can be manager managed or member managed and may be set up within 24 hours in many states, including Illinois! With an LLC, your operating agreement is your governing document and you can elect to be taxed as a partnership or a corporation.
- Corporations are a bit more high maintenance. You must comply with corporate formalities to maintain liability protections, and there are plenty more formalities required than with an LLC. You can elect to be taxed as a C-corp or an S-corp. Corporations are ideal if you wish to go public or increase financing/ownership options but you will need bylaws – and you will need to comply with them. — Corporations may not be ideal for holding property, but in some cases, they make sense.
Some ways you can insulate yourself from claims against your LLC or Corporation are:
- Do not commingle assets
- Maintain corporate formalities, such as preparing resolutions and the like to formalize decision making; file necessary annual reports with the state
- Sign important documents on behalf of your entity, not individually
- Keep separate bank accounts/accounting records
Should you have any questions about titling commercial property or setting up a holding company, please feel free to reach out to me! I am here to help and am your Chicago resource for all things legal.
Junilla J. Sledziewski, ESQ.
@junillaesq – Twitter & Instagram
These materials have been prepared by Statman, Harris & Eyrich, LLC for informational purposes only and are not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Internet subscribers and online readers should not act upon this information without seeking professional counsel, as the advice appropriate for your particular circumstances may vary.