Written By Thomas Horgan
Corporate real estate transactions involve the buying, selling, or leasing of property that is used for business purposes. These transactions can involve a wide range of properties, from office buildings and retail spaces to residential property (multifamily), warehouses, and industrial facilities. Understanding the nuances of commercial real estate transactions can be difficult, but with the right guidance from a corporate real estate attorney, transactions are made easier for investors and businesses alike.
Corporate Real Estate
Corporate Real Estate Transactions: The Legal Process
The legal process of corporate real estate transactions involves a series of steps that must be followed in order to legally complete the acquisition, sale, or leasing of real estate property by a corporation.
Negotiation of Terms and Conditions
This process typically begins with the negotiation of the terms and conditions of the transaction, including the purchase price, any contingencies, and the rights and obligations of the parties involved.
Review/Analysis
The next step is typically the conduct of due diligence, in which the corporation’s legal team reviews and analyzes the property and any relevant documents. This process helps to ensure that the transaction is viable and in compliance with applicable laws and regulations.
Draft and Review
Once the due diligence process is complete, the corporation’s legal team will typically draft and review any necessary contracts or agreements. For example, a purchase and sale agreement or a lease. These contracts will outline the terms and conditions of the transaction, including the purchase price, closing date, and any other important details. The parties will then review and sign the contracts, and the transaction will be scheduled for closing.
Closing
At the closing, the parties will typically meet to exchange the necessary documents and payments and to finalize the transaction. The corporation’s legal team will typically be present at the closing to ensure that all necessary steps are taken and that the transaction is completed in a legally compliant manner.
Property Management
After the closing, the corporation will typically be responsible for managing the property in accordance with the terms of the transaction. This can involve a variety of tasks, depending on the type of property and the terms of the transaction. For example, if the corporation has purchased a building, it may need to hire property managers, contractors, or other service providers to maintain and operate the building.
If the corporation has leased property, it may need to make rent payments and comply with the terms of the lease agreement. In either case, the corporation will need to ensure that it is meeting its obligations and managing the property in a way that maximizes its value and supports its business objectives.
Protecting Assets By Using a Limited Liability Company (LLC)
A limited liability company (LLC) is a type of business entity that provides its owners with limited liability protection. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. An LLC can be used in corporate real estate transactions in a number of ways.
For example, an LLC can be used as the entity that acquires, owns, or leases real estate property on behalf of the corporation. This can help to protect the corporation’s assets and limit its liability in the event of any legal issues related to the property.
Additionally, an LLC can be used as a vehicle for holding and managing real estate investments made by the corporation. This can help to simplify the administration of the corporation’s real estate portfolio. For federal income tax purposes, an LLC with one owner is disregarded as separate from that owner and an LLC with two or more members is taxed as a partnership, unless the LLC elects to be taxed as a corporation.
Piercing the Corporate Veil
In Nebraska, piercing the corporate veil is a legal doctrine that allows a court to hold the owners or shareholders of a corporation personally liable for the actions of the corporation. This doctrine is typically applied when the owners or shareholders of a corporation have acted in a way that disregards the legal separation between the corporation and its owners. For example, by commingling personal and corporate assets or by failing to follow corporate formalities.
How to successfully pierce the corporate veil in Nebraska
In order to pierce the corporate veil in Nebraska, the party seeking to hold a shareholder personally liable must prove that the corporation was under the actual control of the shareholder and that the shareholder exercised that control to commit a fraud or other wrong in contravention of the plaintiff’s rights. Christian v. Smith, 276 Neb. 867, 759 N.W.2d 447 (2008). Courts consider factors such as grossly inadequate capitalization, insolvency of the corporation when the debt was incurred, diversion of corporate funds or assets to the shareholder’s own use, and whether the corporation is a mere facade for the shareholder’s personal dealings.
This can be a complex and difficult legal process, and it is important for owners and shareholders of a corporation to be aware of the potential for personal liability in order to take steps to protect themselves.
Omaha Real Estate Attorneys: Horgan Law LLC
The attorneys at Horgan Law Firm can help in setting up a business by providing legal advice and guidance on a variety of issues that may arise during the process. This can include helping to choose the appropriate business structure, such as a corporation or limited liability company, and preparing and filing any necessary documents with the appropriate state or federal agencies.
Our attorneys can also assist with the negotiation and drafting of contracts, such as leases or vendor agreements, and can provide advice on compliance with relevant laws and regulations. Additionally, our Omaha attorneys can provide ongoing legal support and guidance as the business grows and encounters new challenges.
Frequently Asked Questions
What is a corporate real estate transaction?
A corporate real estate transaction is the purchase, sale, or lease of property used for business purposes. The property can range from office buildings and retail space to multifamily residential property, warehouses, and industrial facilities.
What are the steps in a commercial real estate transaction?
The process typically begins with negotiating terms such as the purchase price, contingencies, and each party’s rights and obligations. Due diligence follows, in which the legal team reviews the property and related documents. Counsel then drafts and reviews the purchase and sale agreement or lease, and the parties exchange documents and payments at closing.
Why hold corporate real estate in an LLC?
An LLC gives its owners limited liability protection, so they are not personally responsible for the debts and liabilities of the business. Using an LLC to acquire, own, or lease property on behalf of a corporation can help protect the corporation’s assets and limit its liability for property-related legal issues. An LLC can also hold and manage the corporation’s real estate investments, which simplifies administration of the portfolio.
What does piercing the corporate veil mean in Nebraska?
Piercing the corporate veil is a doctrine that lets a court hold owners or shareholders personally liable for a corporation’s actions. Courts typically apply it when owners disregard the legal separation between themselves and the company, for example by commingling personal and corporate assets or failing to follow corporate formalities. Respecting that separation is one of the best ways for owners to protect themselves.
What happens after closing on a commercial property?
After closing, the corporation is typically responsible for managing the property under the terms of the transaction. A buyer may need to hire property managers, contractors, or other service providers to maintain and operate the building. Where the corporation leases the property instead, it must make rent payments and comply with the lease.
Horgan Law LLC | Omaha, NE
For guidance on your situation, contact Horgan Law LLC at 402-965-0652 or through our contact page.