re: incorporation
From: Steve Melamut (melamutemail.unc.edu)
Date: Wed, 30 Aug 1995 05:52:51 -0500
I'm a member of Solterra in Durham NC.  We formed a limited liability 
corporation (LLC) in order to build our community.  We are going to 
be 40 families on 20 acres,

The function of the incorporation was threefold.  It provided protection 
for our members if something expensive should happen (like a major 
contractor running with the money or going out of business).  All we 
could lose was the money already invested.  This is a significant 
amount of money, but less than we could lose if we were all hauled 
into court to pay for the communities liabilities.
  
It made us saleable to the local banks and more comprehensible to the 
city of Durham (and its zoning board etc.).  The banks can understand 
what a LLC is, and can understand how it can develop a piece of land.  
The bank might have more trouble understanding a cohousing group without 
the legal trappings.  We did not have any trouble getting the loan to buy 
the land, getting the line of credit to build the infrastructure (roads, 
sewer lines, water lines, etc.).  Nor, did we have any problems with the 
zoning boards.  (Although I must admit it probably did not hurt to have 
two well known and highly reputable citizens of Durham as our first two 
members representing us to the banks and city).

Finally, the LLC was structured as a for-profit organization.  Some of 
our members have invested significantly more than the minimum required.  
This helps to minimize the amount of money we actually have had to 
borrow, and thusly the amount of interest we pay.  The LLC is intended to 
exist until all of the sites are sold and the community is built.  It 
will then be replaced by the homeowners association (again more 
understandable terminology for the banks and city).  If, as we hope, we 
collected more monies than it took to build, people will receive a profit 
back on their investments, pro rata, according to how long they left the 
investment in the LLC,

I forgot one important detail: when members are ready to buy land, they 
can use the money already invested in the LLC to help purchase the site.  
They can of course leave it in the LLC if they choose.  With luck, the 
money in the LLC will pay a reasonable interest to the members for the 
time it was held by the LLC.

The explanation and any unintended editorial stances in the above is mine 
and not of the community.  If there are further questions about details, 
contact me directly and I will try to answer them or refer you on to 
someone else.

Steve Melamut

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