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BUSINESS ORGANIZATIONS

 

 

Sole Proprietorship Sole proprietorship exists when a single business owner operates a business without taking steps to establish a formal organization.  The proprietor is liable for all of the debts and expenses of the business and receives all of the net income.

 

AUTHORITY TO CONVEY, PURCHASE OR ENCUMBER:  The individual or entity will need to execute all deeds and encumbrances affecting the real property.

 

Corporations  A corporation is a separate business entity owned by shareholders formed for the purpose of conducting a business for profit.

 

FORMATION:  A corporation is formed by filing Articles of Incorporation with the Division of Corporations and Commercial Code of the State Department of Commerce.

 

OWNERSHIP OF PROPERTY:  Property is held by the corporate entity.  Judgments and tax liens against the corporation will attach to real property held by the corporation, but not to real property owned by the individual shareholders who own the corporation.

 

AUTHORITY TO CONVEY, PURCHASE OR ENCUMBER:  A corporation must be validly formed in good standing with the State of Utah in order for it to be able to convey, purchase or encumber real property.  The authority to convey, purchase or encumber real property is granted to an individual(s) by the Bylaws of the corporation or by a resolution of its board of directors.  Typically, the Bylaws are not specific enough to grant authority, so in most cases a resolution of the board of directors, certified by the secretary of the corporation, will need to be obtained which identifies the corporate officer(s) who are authorized to execute the transaction documents.

  

 

General Partnership  General partnerships are an association of two or more persons or entities formed to conduct business for a profit.

 

FORMATION:  A general partnership is created by an agreement to conduct business and share profits and liabilities.  The agreement can be written or verbal.  There is no statutory requirement for filing of a partnership agreement to create a general partnership.

 

PROPERTY OWNERSHIP:  Title to real property can be acquired and conveyed in the general partnership name.  Judgments against the general partnership attach to the general partnership’s real property assets.  Judgments and state tax liens against a general partner individually do not attach to the real property assets of the partnership.  However the IRS asserts that federal tax liens against a general partner individually do attach to the real property of the partnership.

 

AUTHORITY TO CONVEY, PURCHASE OR ENCUMBER:  Authority to execute documents on behalf of a general partnership is usually governed by the partnership agreement, and the agreement should be obtained to determine:

1)      The identity of the general partners;

2)      The number of general partners that must act on behalf of the partnership.

 

Limited Partnership  The limited partnership is an association of two or more persons or entities having as partners at least one general partner (who manages the business of the limited partnership and has an unlimited liability) and at least one limited partner (who contributes capital and whose liability is limited to his/her investment in the partnership).

 

FORMATION:  A limited partnership is formed by filing a Certificate of Limited Partnership with the Division of Corporations and Commercial Code of the Department of Commerce.

 

OWNERSHIP OF PROPERTY:  Title to real property can be acquired and conveyed in the limited partnership name.  Judgments against the limited partnership attach to the limited partnership’s real property assets.  As with the general partners of a general partnership, judgments and state tax liens against a general partner individually of a limited partnership do not attach to the real property assets of the limited partnership.  Judgments and tax liens against limited partners do not attach to limited partnership property.

 

AUTHORITY TO CONVEY, PURCHASE OR ENCUMBER:  The authority to convey, purchase or encumber limited partnership property is usually governed by the Certificate of Limited Partnership.  The certificate should be properly filed and a copy should be obtained to determine:

1)      The identity of the general partners;

2)      The number of general partners that must act on behalf of the limited partnership;

3)      Whether the transaction has been contemplated or whether the consent of the limited partners is required for the transaction.

 

Limited Liability Company (L.L.C.)  A limited liability company is a business entity owned by members formed for the purpose of conducting business for profit.

 

FORMATION:  A limited liability company is formed by filing Articles of Organization with the Division of Corporations and Commercial Code of the State Department of Commerce.

 

OWNERSHIP OF PROPERTY:  Property is held by the limited liability company entity.  Judgments against the limited liability company will attach to the real property held by the company, but not to real property owned by the individual members who own the company.

 

AUTHORITY TO CONVEY, PURCHASE OR ENCUMBER:  A limited liability company must be validly formed and in good standing with the state in order to be able to convey, purchase or encumber real property.  The authority to execute exists if all of the members or managers sign the transaction documents or if authority is granted to an individual(s) by the Operating Agreement of the limited liability company or by a resolution of its members or managers, if managers have been appointed by the members to run the Company.

 

Trusts  A trust is a separate legal entity formed usually for the purpose of holding assets for estate planning and at times for the purpose of conducting business as a trust.

 

FORMATION:  A trust is formed when a trustor executes a trust agreement, which designates a trustee and beneficiary.  The trustor then delivers property to the trustee to be held for the benefit of the beneficiary.  A trust is governed by the trust agreement.  Property must be conveyed to the trustees of the trust in order to be held by the trust.  Real property must be conveyed to the trustees of the trust pursuant to a deed.

 

OWNERSHIP OF PROPERTY:  Property is held by the trust.  Judgments against the trust or the trustor will attach to the real property held by the trust.  Judgments against the individual trustees or beneficiaries of the trust will generally not attach to the real property held by the trust.  In the case of irrevocable trusts where the trustors, trustees, and beneficiaries of the trust are not the same individuals, judgments against the trustors will generally not attach to the trust property.

 

AUTHORITY TO CONVEY, PURCHASE OR INCUMBER:  The authority to convey, purchase or encumber trust property is granted to the trustees of the trust by the document establishing the trust.  Trust documents and amendments should be examined to ascertain if the transaction is authorized by the trust, if the trustees have the authority to execute the transaction documents, and the number of trustees required to execute the transaction documents.  A trustee may not delegate her/his fiduciary duties and responsibilities as a trustee to another non-trustee by granting a power of attorney or otherwise.

 

Assumed Names  Assumed names are individuals or, in some cases, a business entity, who are “doing business as” (DBA under an assumed name.  A DBA does not create a separate legal entity.  The identity of the “business” is one and the same as the identity of the individual or business.

 

FORMATION:  There are no formal statutory requirements to do business under an assumed name, but it is common for individuals or entities to register the name with the Division of Corporations and Commercial Code to reserve the name.

 

PROPERTY OWNERSHIP:  Property acquired by an individual or entity under an assumed name is owned by the individual or entity.  The DBA does not modify the ownership structure.  All judgments and tax liens against the individual or entity attach to the property.

 

AUTHORITY TO CONVEY, PURCHASE OR ENCUMBER:  The individual will need to execute all deeds and encumbrances affecting the real property.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The contents contained herein are intended for general informational purposes only, and should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances.  Anyone needing specific legal advice should consult an attorney.