Raising Money Business Structure

[Tyler Gerhold]

Hey BP! So I'm slowly moving into the raising capital/partnership space and was wondering how others structure their business for raising money. Say I want to start "XYZ Capital LLC", clearly this LLC does not hold everyone of the properties, but what does it do? Does it act as a holding company? What if you want to pursue partnerships with other active investors, would XYZ Capital LLC partner with the other investors in a newly established LLC? I guess my question is what is the relationship between your brand LLC and the LLCs that hold the individual properties? Does the brand LLC own the property LLCs or is it just the manager in the property LLC? If it's established as a holding company can it still participate in joint ventures even though it technically isn't an operating company? How have you set this up for your business?

Thank you for any advice you can provide!

Tyler

[Chris Levarek]

@Tyler Gerhold Lot of varying ways to set this up. I would say you are correct on a common method being, you always have a Holding company. This simplifies asset protection, partnerships and organization of finances.

LLC A is a real estate investment firm - Branded and loved by all.

LLC B is a holding company for the property, it owns the Deed.

Now LLC B could be split between 70% investors and 30% LLC A. Or 50% partner and 50% LLC A. Or, or, or.

Another common approach in real estate syndication, you could even have LLC B be the holding company with partners/investors and have the entry of a LLC C (a fund-perhaps another capital raiser/partner) as an investor.

LLC A - Investment company

LLC B - Holding Deed to Property

LLC C - Investment fund acting as one investor in LLC B.

In most cases, LLC A will still qualify the loan with or without personal guarantees from the owners but LLC B will have deed, insurance, etc.

Always good to talk to a SEC attorney and Attorney specializing in entity formation. Hope that helps!