1. W. Zehava Schechter, Esq. West Hempstead, New York Telephone: (516) 292-1550 E-mail: SchechterLaw@gmail.com Website: www.SchechterLawNY.comSchechterLaw@gmail.comwww.SchechterLawNY.com Business Formation and Entities Residential Real Estate Transactions

2. Business Formation and Entities Sole Proprietor Partnership LLC Corporation (“S” or “C”)

3. Sole Proprietorship Advantages Simplest form of organization You, as an individual, establish the business under your own name or a trade name. Little paperwork or planning is required. Taxes are reported on your personal tax returns (Schedule C). Profits (and losses) come directly to you. You make all decisions.

4. Sole Proprietorship Disadvantages Riskiest form of organization. Unlimited personal liability. All personal and business accounts and assets (including your home) are at risk. Creditors and claimants (in this litigious society) may easily access your assets to satisfy judgments.

5. Partnership Generally, 2 or more persons who form a business. Some Types of Partnerships: General Partnership Limited Partnership Limited Liability Partnership Family Limited Partnership (A Buy-Sell Agreement governing the terms of sale or transfer of assets in the case of death or disability of a partner is essential for all of these entities.)

6. General Partnership Each partner may make partnership decisions. Each partner is liable for all business debts. Other partners’ actions obligate you for their actions. Creditors may collect debt from business assets, affecting you – even if the debt was undertaken without your knowledge and at no fault of your own.

7. Limited Partnership General Partner makes management decisions and has greatest liability (responsibility) for same. Limited partners play a passive role. Limited Partners receive profits based upon their partnership interest. Limited Partners are liable for partnership debt only to the extent of their investment in the partnership.

8. Limited Liability Partnership All partners are subject to limited personal liability based upon their investment (similar to corporate shareholders). Appropriate where all investors (limited partners) want to make active business decisions. Limited liability for wrongdoing of other partners.

9. Family Limited Partnership (FLP) Used in estate planning to move wealth intra- family from one generation to another with minimal tax consequences. One or more General Partner manages the FLP and makes all decisions. Limited Partners may not control any FLP assets; buy or sell any interest in the FLP – except to other family members. Disposition of assets results in significantly reduced taxes (gift, transfer, etc.)

10. Limited Liability Company (LLC) Similar to Partnership; No separate entity tax return is required. Profits are taxed once in members’ personal returns. Creditors may not reach members’ personal assets. Limited Liability for members. Easy to organize; simple tax structure.

11. “ S” Corporation Corporate tax return is filed. Profits are taxed once in members’ personal returns. 75 or fewer shareholders. Limits on income, non-citizen shareholder, stock variations.

12. “C” Corporation Provides greatest flexibility for establishing a large company with many shareholders. Creditors are limited to corporate assets. However, corporate profits are taxed twice: 1. on income before profits are distributed to shareholders, and 2. investors pay personal income tax on distribution received.

13. Which business entity is right for you?

14. Residential Real Estate Transactions What you need to know about buying or selling a house, condominium, or cooperative unit in 2012.

15. Types of real estate/personal property Real Property – immovable property, defined by boundaries and property description. Examples: House or other building. Condominiums are included in this category. Personal Property – movable, tangible property AND Cooperative housing corporations, in which members own shares of the Corporation, rather than ownership of the real property.

16. Types of ownership Real Property: Ownership is transferred via deed, which is a document granting ownership of land. Ownership grants full decision-making ability as to the land (subject to governmental rules). Personal Property: Cooperative housing unit shares are transferred via share certificates. (Note that cooperative unit owners are subject to the corporation rules, by-laws, and decisions of the cooperative board.)

17. The role of the attorney in the real estate conveyance process Negotiate terms of the contract Prepare the contract (if seller’s attorney) Review the title report and arrange for omission of any title exceptions. Track progress of purchaser’s mortgage commitment (if purchaser’s attorney) Prepare closing documents Attend closing – transfer of ownership of property Prepare post-closing summary of transaction

18. The roles of other players in the deal Real estate brokers Mortgage brokers Title company New York State Department of Taxation and Finance Your local town/village/city (e.g. New York City)

19. Review of the transaction from start to finish Purchaser sees the house, condominium, or cooperative unit (via a real estate agent) and makes an offer. Purchaser’s offer is accepted by the Seller. Seller’s attorney prepares the Contract of Sale. Attorneys on both sides negotiate the terms of the contract.

20. Review of the transaction from start to finish (continued) Purchaser signs Contract of Sale first and provides a down payment check payable to Seller’s attorney as Escrowee (usually at least 10% of the purchase price). Seller signs the same Contract of Sale, thereby fully executing the Contract. Down payment check is deposited into Seller’s attorney’s escrow account.

21. Review of the transaction from start to finish (continued) Purchaser’s attorney orders a title report (house or condominium) or lien search (cooperative unit a/k/a coop unit. Purchaser applies for mortgage (if applicable). Any title objections are cleared. Mortgage company issues mortgage commitment.

22. Review of the transaction from start to finish (continued) Title company clears file to close. Mortgage company clears file to close. Closing documents are prepared.

23. The closing! Seller, Seller’s attorney, Purchaser, Purchaser’s attorney, Bank attorney, Real Estate broker(s), and title company representative sit at the same table. Seller signs the deed conveying the property to Purchaser (if not a coop unit.) If a coop unit, Seller’s share certificate is cancelled and a new share certificate is prepared for Purchaser. Seller and Purchaser sign NYS and city (if applicable) transfer documents.

24. The closing! (continued) Purchaser and Lender’s attorney provide Seller, Real estate brokers, title company, and anyone else (!) with required checks. Seller hands over the keys to Purchaser! Mazal Tov! Post-closing, attorneys provide Closing Statement to clients.

25. Miscellaneous matters Permits Certificates of Occupancy, Certificates of Completion Real estate tax grievance (done yearly!) Exemptions (Star basic, Star enhanced, VA, firefighter)

26. W. Zehava Schechter, Esq. West Hempstead, New York Telephone: (516) 292-1550 E-mail: SchechterLaw@gmail.com Website: www.SchechterLawNY.comSchechterLaw@gmail.comwww.SchechterLawNY.com Business Formation and Entities Residential Real Estate Transactions