LLC, S Corp, or C Corp? Partnerships? What is best?

[Michael Johnson]

Good Afternoon everyone,

I am a fledgling real estate investor and am interested in hearing the general community's experience/recommendation operating as an LLC, S Corp, or C Corp. Having some background in finance, accounting, tax, and business law, I am aware of the textbook advantages and disadvantages that each offers and their subsequent financial statement impact, but as far as actual operating ease and efficiency what is the recommended entity for holding these real estate assets?

My initial thought process in creating a business entity that exposes me to the least amount of risk would be to structure a  limited partnership with three parties: my partner and I are personally listed as limited partners (each with 49% ownership of the LP) and an LLC (where my partner and I together are the majority interest) listed as the GP with 2% ownership.  In this way, my partner and I will each receive 49% of the operating income through the pass-through entity (with income, capital gains, etc. individually being managed and optimized through individual tax planning) and the LLC will further offer us indirect control while still limiting our personal liability exposure as it's an LLC.  In the event of lawsuit, the plaintiff/tenant would only be able to sue the LLC, which holds a mere 2% of the partnership assets.  So long as the partnership capital accounts are properly monitored and the bylaws of the LLC are strictly adhered to, I don't see how this could be penetrated.  Any thoughts here? Am I overlooking something?

Thanks,

Mike