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CalAttorney2, Lawyer
Category: Real Estate Law
Satisfied Customers: 10244
Experience:  I am a civil litigation attorney with experience representing HOAs, homeowners, businesses and others in real estate matters.
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What are the advantages and disadvantages of making your homeowners

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What are the advantages and disadvantages of making your homeowners association business a limited liability corporation?

William B. Esq. :

Thank you for using our service. My name is XXXXX XXXXX I would like to assist you today.

William B. Esq. :

Most HOAs have previously been Corporations (perhaps not due to choice, but rather lack thereof). Organizing an HOA as a Limited Liability Company would be acceptable, and it is reasonable, although it is not as beneficial for an HOA (which has very narrow and limited purposes) as it is for a business, and it may not recognize the same tax benefits as the same HOA would if it organized as a corporation.

William B. Esq. :

The strongest benefit to using an LLC over a Corporation is to have flexibility in ownership interest and governance structure (both of which are not usually ideal components in an HOA, which usually benefits from continuity with few changes in operations and recorded agreements spanning 20-40 years without amendment). The final choice usually comes down to one of tax benefits. This is a question that a local accountant or tax attorney that can give your HOA a specific tax opinion must answer (I am not permitted to give tax advice or opinions through this service). The current trend however is to organize as a Corporation (not always because it has the optimal net tax benefit, but because you do not deal with the individual tax liability for the owners within the Association in the LLC's "pass through" taxation option).

William B. Esq. :

I hope the above is helpful, if you have any questions please do not hesitate to let me know and I will follow up quickly.

Thank you for using our service, please do not forget to rate my answer when you are satisfied. I am going to transfer our conversation to the "Q&A" format to ensure you can review the entire response (some customers have browser interface issues and I want to avoid any delay) and that I can follow up to any questions you may have quickly. I do wish you the best of luck in this matter.

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Customer: replied 3 years ago.

Thank you. You've been very helpful.