Foreign limited partners/syndications

[Michinori Kaneko]

Hi,

has anyone done a syndication deals with foreign partners?  I'm thinking about doing a syndicated deal with families and friends I have in Japan down the line, but the whole over the sea issue may add additional layer of complexity. What is the best legal entity to form for this? How do we deal with taxes on pass through income for these partners? Would there be consequence at the entity level (even though the entity is pass through, would government in Japan be able to tax at the entity level if the partners lived in japan)?  Any other considerations I am not thinking about? Any inputs/suggestions would be helpful.  Thank you

[Basit Siddiqi]

@Michinori Kaneko

Adding foreign investors does add complexities to the sponsor/tax matters partner.

1) Read the US Tax treaty between US and Japan
2) The foreign investors may need to apply for an ITIN and file a US tax return.
Alternatively, they may invest in a corporation that will invest in the US partnership. This does add an additional filing but does avoid the foreign investors from potentially filing for an ITIN and preparing a US tax return.
3) If the partnership operates at a gain/income. You may be required to withhold a certain amount in witholding and transmit it to the IRS/States.