General Partnership-Can Property be Titled to Individual Partner?

[Margaret Feit]

In a non-community property state, can a husband/wife general partnership (not an LLC) own & insure rental properties in their own names but report them on a partnership tax return? I know if you set up an LLC you are supposed to have the properties actually owned by/titled to the LLC so that the individual members are not involved in ownership. But does the same apply to a general partnership? Or once you take out the liability question, can an individual spouse/partner own property on behalf of the partnership?

I am not looking to set up an LLC. I understand the liability issues, but my husband and I would like to keep our properties in our own names. It's easier to get financing, easier to move funds around between projects, easier to do 1031 exchanges, etc. Quit-claiming has caused us title insurance issues in the past, and since most of our financing is in our own names, we've got our LLC veil essentially pierced before we even begin anyway. We would rather keep everything in our names and have a good umbrella liability policy.

That said, I do like the structure of having a defined business with an EIN and a bank account that is really run like a business and files tax info for all the properties in one place consistently from year to year, and it seems like a general partnership might be the way to combine these options.

I don’t mind filing a 1065 and might even prefer it over putting all the details on our 1040, so I’m not trying to avoid that particular complication. I’m also not concerned about planning for divorce and its complications. But acknowledging the lack of liability protection, are there other tax/legal pitfalls I should be aware of with owning properties individually but running them and filing taxes as a partnership? Any potential issues with the IRS, or with umbrellas not covering “partnership property,” or complications with title if one of us dies suddenly, etc - any red flags I should be aware of up front with this sort of structure?

[Chris Seveney]

Quote from @Margaret Feit:

In a non-community property state, can a husband/wife general partnership (not an LLC) own & insure rental properties in their own names but report them on a partnership tax return? I know if you set up an LLC you are supposed to have the properties actually owned by/titled to the LLC so that the individual members are not involved in ownership. But does the same apply to a general partnership? Or once you take out the liability question, can an individual spouse/partner own property on behalf of the partnership?

I am not looking to set up an LLC. I understand the liability issues, but my husband and I would like to keep our properties in our own names. It's easier to get financing, easier to move funds around between projects, easier to do 1031 exchanges, etc. Quit-claiming has caused us title insurance issues in the past, and since most of our financing is in our own names, we've got our LLC veil essentially pierced before we even begin anyway. We would rather keep everything in our names and have a good umbrella liability policy.

That said, I do like the structure of having a defined business with an EIN and a bank account that is really run like a business and files tax info for all the properties in one place consistently from year to year, and it seems like a general partnership might be the way to combine these options.

I don’t mind filing a 1065 and might even prefer it over putting all the details on our 1040, so I’m not trying to avoid that particular complication. I’m also not concerned about planning for divorce and its complications. But acknowledging the lack of liability protection, are there other tax/legal pitfalls I should be aware of with owning properties individually but running them and filing taxes as a partnership? Any potential issues with the IRS, or with umbrellas not covering “partnership property,” or complications with title if one of us dies suddenly, etc - any red flags I should be aware of up front with this sort of structure?

 This is a question you really need to ask your CPA and I would not take advice from someone on BP unless they were a CPA, but like attorneys, they are not your CPA so they would not be technically providing you with a recommendation or advice.