Structuring Note Investment JV

[Steve Burt]

I am looking to purchase a note with a couple of partners. In the past I have used series LLCs for each investment and I am familiar setting them up. However I have never partnered with anyone. I am wondering the best way to structure this deal. I thought about placing the note in an LLC of which I am the only member and then signing a JV agreement with the other partners. The JV agreement would spell out the revenue and expenses allocation and how the deal is wound down.

I am not sure if this is the best way though as I have read in a couple of places that a JV exposes partners to unlimited liability. I was wondering if anyone could comment on best practices or mention a lawyer in the BP community that is versed on the subject

[Bob Malecki]

Hi Steve, part of the solution is how your partner's are participating in the deal. Are they coming in as individuals or are their llc's coming in as a partner? If it's the latter then their individual llc's will limit the liability of course and their exposure in the deal. 

I typically use a personal property trust to take assignment of the note and then in the trust the partners are named as beneficiaries with their respective ownership portions. 

I also have a joint venture partnership agreement which details the relationships of all partners In the venture and also identifies the trust as the entity which takes assignment of the asset. 

Optionally you could use a multi-member LLC with a very well laid out operating agreement so as to define the roles of each member of the LLC. This could be a better solution especially if you remember is her entering the deal as individuals rather than under their own operating companies.

Bob Malecki