Syndication Structuring Options - how to finance a deal?

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I suggest you consider a Series LLC.Do not even mention stock !Partners may have options to buy interests in an LLC.Your Operating Agreement governs the members, this is not a public document and can be amended any time.Members can also exit at will, another may join, depends on the project.A Member can also be another LLC, so LLC A could have 3 members and join as one member of LLC B then having 3 members.See a good business attorney! This is not a DIY thing. Good luck :)

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Hi @Dan Walker -I have had a bunch of clients who have had great success with utilizing Series LLCs particularly with purchasing single families and purchasing pools of notes. The only state I would not recommend using a Series LLC is Tennessee as it doesn't seem that the series LLC mechanism that the state offers is well honed. Illinois seems to do the trick as do Nevada and Delaware.As for financing, you can always open another LLC in that state for the purpose of purchasing a particular property. I wouldn't let that discourage you. Also, I had clients that purchased multiple mobile home parks throughout the mid-Atlantic all with separate Delaware series. All of them were financed by traditional banks. Again, it matters on the lender, so don't let that discourage you.Google search "Delaware series Limited liability company real estate" and you will find a great article. I would post it here, but I am not sure outside links are allowed. It is not an article I wrote.

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I would speak to a securities lawyer. But as someone who as zero legal experience, you may be able to propose to your employers that a "Member Managed" LLC is an appropriate structure that does not run afoul of their internal policies. My understanding is that that is not a security since all participants are active in the deal. If this is 3-4 close family members and friends, this may be an acceptable partnership for you. If it's larger than that, you may want to look at other options.

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Great comments; I was redirected back to this topic.I do not suggest you "market" membership to any LLC, that can become an SEC matter, you move members in or out between people you know already. Using a UCC Filing you can pledge assets of one LLC to another as well as income generated from any other asset, with this being accomplished after you buy and finance a deal, but your lender is in first position. Asking for a loan publicly by a corp also becomes a security issue, depends on collateral and use of funds too, when dealing with family or friends, you simply ask you don't take out an ad in the WSJ! That's what bonds are, a loan secured by a promise to pay a certain sum over a period of time. :)

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What about a debt offering where you take a loan from friends or family with promise of repayment? Perhaps less attractive for the friends/family, but a fixed income investment for them.Keep in mind that buying residential 2-4's as an LLC, or any corp for that matter, will reduce your financing options significantly. Residential lenders want a person, not a corp.

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Series LLCs, in my opinion, are great for you if you are buying multiple properties on your own or with the same 2-4 investors every time, but not so great for marketing opportunities to investors as they can be complex and your investors typically won't understand them, making it challenging to raise money. Plus, if you are getting bank financing, you will likely have to form a new single purpose LLC to take title to every property anyway as the lender may be reluctant to lend to a separate Series of an LLC. And amending any corporate governing document with investors will typically require their approval. As for your employer's prohibition, many investors in similar positions to yours end up changing jobs and giving up their securities licenses when they decide to start syndicating properties as there is really no good way around it.

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Sounds like you should renegotiate with your employer. Doesn't seem like your employer, investors, or regulators would look kindly on you trying to find a way around this.

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@Bill Gulley @Steven KleppinThanks for the feedback! I will definitely look into both of those options. The apparent, high-level, simplicity of amending a Series LLC is very interesting. I had never heard of that. I have a few lawyer friends from college that I plan to consult, and eventually hire, I just don't want to waste their time brainstorming so this is very helpful.

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@Samir Shahani ^

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I guess I should have prefaced that we don't operate in the real estate space and this isn't a regulatory issue - purely an internal company policy. My compliance department told me to look into other structuring options and come back to them and they'll let me know which ideas can/cannot work, so that's what I'm trying to do. Additionally, my father is one of my two business partners, there is nothing unethical about this. Constructive ideas would be appreciated.