Marcus Adams Capital LLC is a new business creation machine. Every time the L.A.-based investment firm buys a new piece of property, it forms a new limited-liability company.
On complex deals, it may form more than one LLC.
"Just this year alone, we've created 18," said Bob Pardo, president of Marcus Adams Capital. "It's a lot easier structure to use than the limited partnership, which for decades had been favored for real estate."
All told, 64,000 LLCs were created during the 12-month period ending June 30. That constitutes an 18 percent jump from a year earlier. (The state does not have figures for L.A. County because it does not track new business filings geographically.) The number of new corporation filings jumped by 6 percent.
"These figures are a mark of the general increased economic activity in California," said Secretary of State Bruce McPherson, whose office compiled the numbers.
Limited liability companies, or LLCs, are essentially a hybrid company structure. They offer a partial shield of liability for the principals that a corporation provides, so that investors or partners in a venture can't have all their personal assets seized if the venture goes south or lawsuits arise.
But LLCs use the tax structure of a partnership in which the principals pay income taxes based on their share of the profits of the business. There is no additional corporate tax.
"This is mainly real estate transaction driven and for the last couple of years, we've been on the upside in the real estate sector," said Andrew Raines, a partner in the Brentwood law firm of Advisors LLP, who said he has seen a spike in investor clients seeking to purchase properties using the LLC designation.
At Marcus Adams Capital, Pardo said lenders now require the additional liability shield that an LLC provides, as well as a separate entity that can smooth the way for foreclosure proceedings should a deal go south.
LLCs are listed with the Secretary of State's Office as a category of new business filings. But in many cases, they are really just investment vehicles.
This offers another explanation for why economic activity in the region appears robust while payroll job creation has been mediocre.
"To the extent limited liability companies are investment vehicles, they don't create direct jobs," said Esmael Adibi, director for the Anderson Center for Economic Research at Chapman University. "There may be some indirect or temporary jobs, like fixing up a property you purchase, but it's not like forming a corporation and going out and hiring people to run the operation on a permanent basis."
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