structuring LLC for syndication

[Timothy VanWingerden]

I'm working on syndicating a deal and I have a number of investors who have an interest in committing some funds with me to make this deal work. My thought process is to set up an LLC where each investor has a % ownership based on the amount of funds they have committed. However, I have not done this before and just looking for some direction on the best way to go about this. I'm consulting my accountant but her office is closed today so just trying to get some feedback on this as I move forward.

Additionally, if you know of any professionals in the Lexington, KY area that are familiar with this I would appreciate the recommendation.

[Eamonn McElroy]

On the legal entity side, an LP usually works best for a syndication.  LLCs with strong operating agreements specifying who the managing members are and who the non-managing members are second in popularity.

On the tax entity side, it's generally preferable to have a syndication taxed as a partnership.

Partnerships are very flexible with income and loss allocations as long as those allocations have substantial economic effect.  Distributions are also very flexible.  Your accountant can fill you in on the details.

You'll want to consult both an attorney and your tax professional regarding specifics and what is best for you and your investors.