LP Conversion to LLC...Pros & Cons?

[TrvlBug]

DH is a limited/silent partner in some real estate. This investment dates back 40 years. The managing partner called yesterday to advise that they are in the process of converting their Limited Partnership to an LLC and need everyone?/majority? signatures for this move. And, they'd like to complete the conversion in the next 10 days . They are doing this for liability advantages, to both the the managing partner and us limited partners.

He emailed us the 40 page document which we have not reviewed...not that we'd understand any of it! And DH is out of town at a conference for the next 6 days.

Would love some input on the pros and cons. One of the cons appears to be what we would assume to be additional costs associated with LLC fees and administrative reqs. Are there reasons not to sign for the conversion to the LLC? Any advice would be greatly appreciated.

 

[COcheesehead]

The first question I would ask is why? Explain what you get for doing the conversion and what was the motivation. Were you receiving K1’s before because you will under the LLC.

 

[TrvlBug]

The first question I would ask is why? Explain what you get for doing the conversion and what was the motivation. Were you receiving K1’s before because you will under the LLC.

The main motivation is personal liability 'to the General Partner and limited partners'. This seems to imply that the limited partners also have personal liability under a LP. Per Mr. Google, that's hogwash and true limited partners, which we are, do not have personal liability where the General Partner does, big time.

The other benefits he lists don't make much sense to me:
1)...resolve issues that could affect ability to refinance. What issues. The property has been refinanced under the LP.

2) Tax law and entity law changes that have taken place are not reflected in the LP and can potentially lead to issues with distributions in the future. Huh? There have been no problems with quarterly as well as occasional other distributions in the last 40 years!

Unfortunately, we do not have an attorney, otherwise I would send this over to him for advice. We don't want to hold this up if it's a nothing. I certainly can see where they would want to do it for the liability issue. That's a huge one.

Yes, we receive K-1s every year under the LP and would continue to receive them if/when converted to a LLC.

The conversion will take place if a majority of the limited partners vote in favor.

 

[Piper20]

DW inherited a small percentage of NYC office buildings. Real estate developers purchased a few percent from other TIC owners. Then the developers try to force a partition sale. The LLC will prevent this from occurring. The developers have been successful in the last few years forcing the partition sale of NYC buildings.
Currently tied up in NY Supreme Court.
It should be resolved soon by paying off the developer.

 

[TrvlBug]

DW inherited a small percentage of NYC office buildings. Real estate developers purchased a few percent from other TIC owners. Then the developers try to force a partition sale. The LLC will prevent this from occurring. The developers have been successful in the last few years forcing the partition sale of NYC buildings.
Currently tied up in NY Supreme Court.
It should be resolved soon by paying off the developer.

Verrrry Interesting. While the investment has been good to us and the apartment building has appreciated GREATLY in value (we're in the SF Bay Area) we want out due to our age. We've simplified and consolidated our investment holdings over the years and this is the last one and is of course, very illiquid.

Thank you so much for your input. This is the kind of stuff we're looking for. It appears we should get an atty involved to review this and find the original paperwork!!!