Types of commercial real estate deals

A condominium unit may be owned jointly, by a corporation, or by a partnership. If the organizational structure is joint tenancy, the owners will be on the deed as co-owners and each owner will have an equal and undivided interest in the condominium and will share in the financial obligations of the organization. If a Corporation is to be used, then everyone will be issued shares, and when an owner decides to sell his share, he could simply sell his shares in the corporation. Also, if a limited partnership is used, the owners could sell their percentage in the partnership.

Probably the easiest method of ownership would be to use a limited company. With a Limited Partnership, the partners are only liable to the extent of their contributions, while the General Partner has unlimited liability. The General Partner, (or General Partners), is the only one who
makes decisions for the association. (You could be the General Partner and serve as the manager of the organization and purchase insurance to cover any liability.) With a Corporation, each owner has shares in the corporation and if they decide to sell their interest, they simply sell their shares. . It might be a good idea to include the “right of first refusal” in the bylaws. That way, the other owners could have their first chance to buy the shares before they were offered to the public.

The lawyer would produce the Articles of Incorporation, Bylaws and Shareholders Agreement and the corporation would be managed by a Board of Directors in accordance with the Bylaws.
Everyone could be a member of the board with the officers of the corporation elected by the board and everyone had one vote unless they had purchased more than one time slot. The officers would be the President, Vice President, and Secretary-Treasurer. The bylaws would establish what percentage of the total votes would have to be cast for the approval of decisions by the corporation. Annual shareholder meetings would have to be held with all owners invited.
The lawyer could put language in the shareholders’ agreement about how the corporation would handle a situation in which one or more of the owners did not pay their monthly or annual contributions to meet the obligations of the organization. The Board of Directors can vote to sell
the shares of any shareholder who does not pay his dues. The corporation must keep funds set aside to meet monthly obligations in case an owner falls behind on their payments.

You should consult with a CPA or tax attorney when you are setting up your organization to ensure that you receive the proper tax treatment. If you use a corporation, you’re better off calling it a “not-for-profit” corporation, but you’ll need proper tax advice on this. The corporation will not generate profits and its use is strictly for the ownership of the unit. You would probably choose a Subchapter S corporation, and part of the expense of maintaining a second home could possibly become a tax deduction for your partners. It would be great to have a second home in a tourist area and have a tax deduction.