LP / GP LLC Structure for Syndication

[Ken Martin]

Hi BP community, I am currently having a debate around how to structure GP and LP interests in a real estate syndication. My ideal structure would be through three different entities. 1) Property level LLC that the asset will be purchased through, 2) GP level LLC that will only collect fees and promote/carry from the deal, and 3) Company level LLC that will invest in the Property level LLC along with all of the other individual LP investors. In this structure, the Company level LLC would participate in the deal essentially as an LP but maintain majority voting rights, while the GP level LLC won't technically be investing any money in the deal, it will be wholly owned by the Company level LLC, and will be involved in a management capacity while collecting fees and promote. This structure just seems very clean to me, but are there obviously legal, accounting, or tax issues with this structure that I'm missing? What is the ideal structure that minimizes the number of LLCs that need to be created?

[Bryan Hancock]

Generally the sponsor will have a LLC to operate a project and a separate LLC for the individual project to invest in, which is often labeled a "SPE" for special purpose entity. Anything past that will probably be hard to explain to investors and I am not sure why it really would be needed unless you're doing something exotic like introducing some pre-funding entity or something. Sometimes you see side letters in agreements so I could see using one in that situation, but in general I think 2 entities is sufficient in most real estate investments.