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When to buy commercial property, or corporation?

Q: I am looking at a piece of commercial property being held by a corporation. The seller tells me this is the only asset of his corporation and he is asking me if I wish to purchase the corporation rather than the property. He is telling me if I wanted to hold the property in a corporation rather than individually, all the work is already done and all we need to do is transfer the interest in the corporation.

This makes sense to me as I do intend to hold this in a corporate or LLC (limited liability corporation) entity. There is a little alarm going off in my head though telling me I need to proceed cautiously. I'm curious as to your thoughts on this.

A: My first thought is I'm impressed by your alarm system. This is a time to move cautiously.

When purchasing the assets of a corporation (in this case, the real estate you are considering buying), most attorneys advise to simply purchase the assets of the corporation, rather than the corporation itself. Yes, from an administration standpoint, it is likely you would have less work and expense transferring the ownership of the corporation from A to B rather than creating a new corporation or LLC from scratch. However, the downside is what triggered your alarm.

If you purchase the corporation itself, you purchase not only it's assets, but it's liabilities - existing, potential and unknown. Perhaps the seller has known or unknown tax issues. Maybe the corporation has debts that have not been disclosed to you. These issues potentially become your issues once you become the primary shareholder of the corporation.

I strongly suggest you speak with an attorney experienced in this area before proceeding any further. There are far more issues involved than I can discuss here. Heed your alarm.

Q: My father died recently and left his house (or so we thought) to me and my two siblings. This was my parent's home for about eight years. My mom died a number of years ago.

We now learn that when my parents bought this house, they received a loan from my mom's parents, who are now both deceased. We have also discovered that my grandparents were added to the title at the time the loan was made.

Our real estate agent says we need to speak to an attorney before we can list the house. We don't even know what questions to ask. What issues do you see here that we need to be aware of?

A: Interesting. Wondering why your grandparents were added to the title of the property. Perhaps for whatever reason a note and second mortgage would not work, which would have been the more conventional way of handling this. It would appear your grandparents used adding themselves to the title as their security for repayment.

So now to convey the property to you and your siblings, not only your dad's interest in the property needs to be conveyed, but your grandparent's interest, if any, as well. If dad had a valid will that provides that his interest in the house goes to his kids, that takes care of conveying dad's interest, but what about your grandparent's interest?

You are going to need to speak to a real estate attorney about this, but for starters, how was the property legally "held" between your parents and grandparents? It is possible your grandparents were held as "joint tenants" with your parents. If this is the case, as each party died, their interest passed to others. To whom would be dictated by the wording on the relevant conveyance documents, but it is possible your dad had sole interest in the property simply because of the fact that he outlived everyone.

Another possibility is your grandparents owned as "tenants in common" with your parents. In this case, your grandparent's interest would pass pursuant to their wills, trusts or heirship, rather than simply to the surviving property owners. Things likely get far more complicated here.

Again, contact an attorney familiar with these issues. They will review the relevant documents and hopefully your dad's wishes will be honored without much difficulty.

• Send your questions to attorney Tom Resnick, 910 E. Oak St., Lake in the Hills, IL 60156, by email to tom@thomasresnicklaw.com or call (847) 359-8983.

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