LLCs, partnerships,
corporations, sole proprietors,

what's the rights that type of
entity for your syndication, or

fund? Today we're gonna do a
video that's a blast from the

past, it's a couple years old,
but it's still very relevant and

very valid and up to date
information. So it is a

discussion about how you would
choose your entity type. And

that entity type that would fit
for your syndication or fun, I

hope you find it useful.

We are going through the course
specifically, we're talking

about company and even more
specifically, we are going

through foundation. So today
segment we are discussing entity

type, and what type of entity
should you be forming? So you've

heard lots of different things
about corporations LLCs,

everybody's got an opinion DBS.
So we're going to go through

what each of those look like.
And then we're going to talk

about how exactly you choose
what makes the most sense for

you. Give me a little bit of
advice and feedback on what the

next steps are and who you'd
want to talk to, to really firm

up that decision. And then and
then you're going to have a

pretty good guidance on how to
do it. And then ultimately,

you'll make a decision on on
what it's going to look like.

Now, these types feed back into
your structure. So each of those

entity types, that management
entity that you're going to

form, it might be an LLC, it
might be a corporation, the the

buildings themselves, they might
be LLCs, they might be

corporations, you might even
want to do them as DBAs, though

I doubt that that you would
actually want that. So let's

talk about those different types
that there are. So start us off,

we've got kind of the simplest,
we've got DBAs. So the DBA

stands for doing business as
these are normally filed in your

local city, or your local
municipality. Basically, it just

lets them know that there's a
fictitious name that you're

going to be using, and
associated with business. This

is everything from your sole
proprietor, it could be a

partnership, but DBAs are or
this type. The other type is, is

partnerships themselves. Again,
that gets filed, typically it

gets filed at the local level to
get a name associated. But this

really depends on your
particular state. So in

California, if you're going to
have a general general

partnership, you actually don't
need to file anything with the

state. Not all states follow
that sort of methods, some do

require that you file
partnership agreements with

them. So you need to check on
what your local rules are, if

you decide ultimately that a
partnership oops, makes the most

sense for what you're going to
be doing. The next type is an

LLC, LLC stands for limited
liability corporation. These

have been around since the
1970s. It was an alternative

that came out of smaller
companies not happy with all the

requirements in order to act as
that corporations were being

held to. So they are a little
bit simpler. And they have some

different nuances with those as
well. Lastly, we have

corporations. So you a
corporation is its own entity as

well. It gets filed with your
state. And it is a it's a very

common mechanism. You've I'm
sure you've heard of them. So

you may be asking yourself,
Well, why didn't I write S corp

or C Corp here. So S corp and C
Corp are actually PACs, ways of

filing taxes, they have tax
implications. They don't have

actual implications as it
relates to an actual property

itself. So you may be surprised
to learn that an LLC can be an S

corp, or it can be treated as a
partnership. It's really up to

you and how you choose to do
that basically whether or not

you make an S corp election with
the IRS. So that's why we didn't

do those. We will be talking a
little bit about tax strategy,

but not a lot in this because
really the best one to answer

that. It gets really specific
for what your own particular

needs are. And so for that
probably you'll want to talk

with the accountant that you've
already identified or will

identify as part of your team.
We'll be talking about teams in

a later on segment as well. So
these are the four main types of

entities that we're going to go
through. So the first question

that we ask ourselves is, how
many owners can there be. So

this will kind of rule some
things out for you, sometimes it

won't. So DBA is one person. So
it's always one person, that's

who it is, it's a sole
proprietor acting as one person,

a partnership always requires
two or more people in order to

be a partnership, you can't be a
partner alone. So it's two or

more. And you actually can be,
have one person as an LLC, or as

a corporation. So so if you have
more than one person, that kind

of rules out DBAs, but all the
others are on the table. So now

let's talk about asset
protection. Oops.

So asset protection is very
important. So there are there

are two kinds of asset
protection that we like to talk

about, we have what's called
inside out and outside in. So

let's write that down. Inside
Out.

So inside out asset protection
is the is the protection that

you would have, as an
individual, as the manager, or

the main executive, inside of
the company, to protect you from

outside from the outside. So it
would be, you'd need to make

changes to the outside. So say
you have a huge amount of debt,

whether or not you'd be able to
be relieved that liability is

what we would considered
outside, inside out asset

protection. And outside in is
the opposite of that. So it is

say there's a lawsuit taking
place, and somebody is suing the

LLC, or the corporation or
whoever, whether or not that

protects you from liability
against them. So as far as DBAs,

there is no asset protection
whatsoever. It doesn't exist. In

terms of partnerships, this is
where it gets a little bit more

tricky. So we have two kinds of
partners. We have general

partners, and we have limited
partners, the general partner is

the one who makes all the
decisions, who does all the

work. And the limited partner is
the person who mostly just

invested the money and just sits
back and lets the general

partner do the work. So as far
as asset protection goes for the

the limited partner, it is good
asset protection, but there is

no asset protection for general
partners at all. Now for the

LLC, we have an LLC is good. For
Inside Out. It's good for

protecting against that. And
it's probably less good. But

it's not as well tested, but
it's probably somewhat less

good. About for outside in. And
we can get into much more detail

about this in a consultation,
then we're starting to talk

about charging orders and things
like that, and different kinds

of LLCs in different states and
how those affect for this

purpose. It's pretty good. And I
wouldn't rule out asset

protection for an LLC, I
wouldn't base asset protection,

like getting rid of an LLC, just
because of that. For

corporations, corporations are
good for Inside Out liability.

It's very easy to just file just
basic BK or bankruptcy a

corporation and the debts of
that corporation go away. It is

bad for outside in as long as it
is a closely held corporation.

So if if you are the only person
in the corporation or it's

extremely small, but really
you're doing all the work, you

really aren't going to have very
great outside in protection. So

you probably are going to get
the most amount of asset

protection from the LLC. In
terms of governance and

management And, you know, this
is what we're talking about here

is how easy is it to get through
all the paperwork and, and

comply with all the legal
formalities. For DBA, it's easy,

there's very, very, very little,
maybe you need to update

something every year or every
few years, with your local

municipality. And that's it.
With a partnership, it's also

pretty easy, it varies state by
state exactly what needs to be

done. So we'll just put pretty
easy. And then in terms of an

LLC, it can be easy to complex.
This is where it comes down to

whether the LLC is member
managed, or, or, or managed or

managed. So a manager managed
LLC is where the manager makes

all of the decisions. So if you
or your entity is the manager of

the managed LLC, you're the one
making all the decisions and you

just take to your investors as
to a vote as necessary, as

required by your operating
agreement. In general, the it's

pretty easy to keep them up to
date, keep them things going, it

really becomes down to what your
your operating agreement says.

And unless there's some sort of
specific rules of your state in

order to comply, so many states,
they don't require a board of

directors, they don't even
necessarily require any

executive officers. And so that
can be pretty simple. Whereas a

corporation is almost always
complex, you typically need a

board of directors and officers.
Now in terms of maintenance

costs, that's going to be very
specific on your individual

states. So you really, you could
draw out and find out through

your local state, what the costs
are going to be for each of

these. And then you've got your
multi state issues like say you

have, you know, everybody
thinks, Well, you file a

corporation in Delaware, that
isn't always the case. If I file

a corporation in Delaware, and
I'm doing business here in

California, I still have to file
with the state of California, I

still have to pay my taxes with
the state of California. And,

and I have to let the California
know that this foreign

corporation this Delaware
corporation is doing business in

its state. And it's because of
that rule, we're not going to go

into choosing jurisdictions
beyond the easiest way to choose

a jurisdiction is to just put it
wherever your company is, there

is nuance in there. And there
may be reasons why choosing a

different jurisdiction would be
better. But that's outside of

the bounds of this discussion.
So once you've got the your,

your kind of this matrix in
mind, the next thing to think

about is how to make the
decision on what to file us. So

here, I would really start
thinking about the entity that

you're going to be doing. So
let's start with the managers

entity right now. So what's most
important out of this to your to

your actually, one more, let's
put one more topic here, because

this can be important too. So
let's put record keeping as

well. Record keeping for DBA is
extremely easy. I would say most

of the time, it's easy to do a
partnership, it's pretty darn

easy to do a LLC, but we'll put
moderate just to differentiate

it from easy. And by that I
mean, you're going to have to

file a Statement of Information
probably every year with with

the state. But it's very simple.
It's a one page form almost

everywhere. So it's pretty
simple to do. Now for a

corporation, it's much more
complex. You need to file you

need to have minutes of regular
scheduled board meetings. To

make and spell. You still need
to do the statement oops, the

Statement of Information. And
you need to have records of any

sort of decision make decisions
that take place. Now if you

don't do that your corporation
could very easily be determined

by court as not being a
legitimate Corporation, and

you'd get get rid of any sort of
asset protection that you had

from the very beginning anyway,
that's why it's very important

to comply with the record
keeping rules. Now, when it

comes time to make a decision
about what you want to what kind

of entity you think you need to
form. I don't think there's, I

don't think there any attorney
would ever recommend anybody do

something as a sole proprietor,
or even as a partnership for

something like this. A, perhaps
there are good times for sole

proprietor for a partnership,
especially when you need

extremely low overhead, you need
to be very easy, and you want

taxes to be very easy. That's
pretty much how we'd make the

decision here. But this is just
generally not going to be the

best choice for you to do a DBA
or partnership. Now an LLC

versus a corporation, it really
comes down to a few things. And

what I think most way I would
think about it is how easy do I

want my governance? And how easy
do I want my record keeping, I'm

getting about the same amount of
assets, about the same amount of

asset protection a little bit
more with an LLC. So it's

actually got a really great
structure for me. And last.

The only exception would be if I
really am going to be using this

kind of structure anyway, for a
board and for officers. Or maybe

it's, it's something that your
investors would rather see

because they're more familiar
with corporations as well. So

almost always for the property
itself. You're going to use a an

LLC, because there's so much
easier to put together. And the

paperwork is so much less that
it's it's just generally easier.

In terms of a corporation. In
less if, again, my my thoughts

would be well, if you wanted to
do put together a C Corp,

because that's what your
investors were used to. And

that's what they were requiring.
Now, C Corp is a type of taxable

entity. So it would be a
corporation but filed with the

IRS that you would be taxed as a
C Corp. And it has different tax

rates, it has different
opportunities for deductions.

LLCs and s corpse have an
opportunity for 199 A deduction.

And your accountant can walk you
through that if that's

appropriate for you. They also
can walk you through whether or

not it makes sense because
corporations in general are not

subject to self employment tax
most of the time. So it really

would be come down to what do I
if I need to file a C Corp as a

C Corp, I'm going to have to do
it as a corporation, I'm not

going to have that availability
in an LLC. And really, what kind

of level am I putting it into?
And is this something that I

want to really make something
easy for me to do and be able to

trade and move people in and out
of, for real longevity, I'm

probably going to choose a
corporation, because it's just

better set up for that sort of
thing. But if this is something

where I'm going to just manage
it, I'm not quite sure the long

term future of it, whether it's
just going to be five years or

whatnot, I might very well
choose an LLC. So this, so I

would go through and rank those
and just kind of decide, well,

this is important to me, this is
important to me, this is

important to me make that
decision, and that's your

decision, you're gonna have it's
quite easy to do different

entity types for different types
of entities. So your properties

will will almost always be LLCs.
But perhaps your your management

company will be a corporation,
and that's totally okay. So go

through that, think about that
make a decision. And the next

step then really is to get that
filed. And so I would file that

your management entity sooner
rather than later. That's what

you're going to be building your
name and reputation under. So

that's really the first decision
you've got to make. And when you

do that you have a limited time
to make an S corp election. So

talk to your accountant, either
as you're doing it or very close

in time to when you're doing it,
to see to get their input on

whether it makes more sense for
you to be taxed as a partnership

or taxed as a escort. I hope
that has been helpful make those

decisions, write it down, and we
will see you in the next

session. I hope you found have
video helpful while LLCs are

probably the most likely
candidate for what syndication

structure or fund structure
you're going to use. As you can

see, it's not the only choice.
If we can help you choose a

break kind of entity for you and
make your syndication or fund

journey better, please give us a
call. My name is Tilden

Moschetti. I am a syndication
attorney with the Moschetti

Syndication Law Group.