In this module, we're going to
show you how to protect yourself
from the very beginning from
either deals going sideways, or

making a mistake by choosing the
wrong kinds of investors, you
know, the investors that are
just nightmares. So this is a

very simple process, there's
really two different kinds of
decisions that we need to make.
The first decision that we have

to make is about entity types.
So we'll go over what the basic
entity types are. And then we'll
also go through what the

structures look like. And that
structures of typical
syndication companies, and how
they run their deals. Once you

have that in mind, you'll know
how to basically build that
whole framework that lets you do
syndications in a much safer

way. And this really boils down
to protecting you as the
syndicator, from anything going
wrong and protecting you from

liability. That's one of the key
tenants that we want to do.
Because if you ignore that,
suddenly, you could be liable

for a lot of money for things
that were just simple mistakes,
or just acts of God that you
didn't have control over.

The topic of entity selection
and structures may only be
interesting to lawyers. But I'll
tell you, you'd be surprised how

important this is. So let me
tell you a little story. And
this isn't about a syndicator.
But it is about commercial real

estate. So if I invite you to go
ahead and Google about this as
well, and look it up, look up
Ghost Ship fire, and you'll see

the articles that pertain to it.
So here's what happened. In
2016, there was a series there
was a bunch of buildings that

was owned by one woman in the
Bay area of California. And she
owns like I said about 20
buildings, and one of those

buildings was known as the ghost
ship. Now she had rented out
that, that building, and she
knew that the people who were

living there really weren't
supposed to be living there they
were supposed to be doing. I
believe it was supposed to be an

office building. And she knew
that they were doing something
more like co-habit, dating,
living and something like that.

Well, in 2016, there was a huge
fire at this building known as
the Go ship, which had been was
being used for like a big party,

people were unable to escape
through the exits that didn't
have the proper fire doors 36
people died to severely injured

out of that. So catastrophic
debts. Now, why this relates to
structure is because she owned
all 20 of those buildings in her

trust. Now a trust is just
another entity type, just like
the other entities, we're gonna
go over today that you wouldn't

use a trust for syndicating. But
she decided to put all of her
properties just inside of her
trust and thought she was

protected. She doesn't own 20
buildings anymore. So that's why
this is so incredibly important.
So let's get right into it and

discuss what is what the basic
entity types that we're talking
about are. So we've got a few
different choices that you could

make. Now, if you chose to put
everything under your own name,
you will be basically acting as
a sole.

Pro PRI tour,

you'll be acting as a sole
proprietor, that is just you,
there is no liability
protection. And and that's all

it is. And there's more detail
in the notes for here. We've
given you a handout as part of
this module that breaks us down

into a table similar to what I'm
drawing right here. But for our
purposes, I'm gonna go through
it a little bit faster than the

level of detail that's there. So
there's a sole proprietor then
there is a partnership. This is
two or more people coming

together for a common
enterprise. Then there is your
limited liability partnership.
And then there is your limited

life. ability company. And
finally there are corporations.
Now, you may be asking, Well,
what about S corporations versus

C corporations? Well, S
corporations versus C
corporations are not specific
kinds of corporations, their

ways of being taxed. And so
we'll talk about taxes, just
very, very briefly here. But
that's why it doesn't say S corp

versus C Corp. So let's just
look at a few little things that
that kind of call this out. And
as I go through the start

thinking about what makes most
sense for you, in terms of
number of people involved, the
asset protection, the

maintenance,

and governance and taxes.

Because at the end of the day,
there's probably one entity type
that makes the most sense for
you. So when it comes to sole

proprietor we're talking about
there's one person, and that's
you Everything is under you your
name, your social security

number, or an EIN that it's
assigned specifically to you as
a person, there is no asset
protection whatsoever, in a sole

proprietor. In terms of
maintenance, and governments,
though, it's very, very simple.
There may be you have to do a

DBA, or doing business as filing
with your local municipality.
But that's it. And then in terms
of taxes, this all goes on your

individual taxes, you don't have
a choice about that.

Now, let's talk about
partnerships. Partnerships are
always two or more people, there
is no there's no asset

protection for the general
partner, that's the people doing
all of the work for but there is
a limited amount for

for limited partners.

The governance is actually
pretty easy. There is not a lot
that you need to do for a
partnership, but check with your

local state, if this is
something of interest to you.
And then in terms of taxes, you
probably are going to be paying

as a partnership. Then there is
your LLP, which also requires
would be two or more people. And
now there's some asset

protections for the general
partner, and good asset
protection for the the limited
partners. So why would you

choose a partnership over an
LLP, really, it comes down to
cost of filing, and then this
the difficulty of governance

governing it. There can be some
moderate amount of maintenance
that needs to be taken place on
the LLP in order to keep it

valid, and you will be taxed as
a partnership. Now we get to the
LLC, and the LLC can have just
one person. But in order for it

to have the best kind of level
of asset protection, really do
it should be, you know, two or
more people in the same sort of

format where you have someone
acting like a general partner,
so that would be your managing
members of the LLC in order to

manage it. And then and we'll
talk about managed, member
managed versus manager managed
LLC is in just a bit. So one or

more people for an LLC. It has
it has good asset protection and
also easy to moderate

governance.

Not very difficult, but there is
some work to be done. Again,
check with your local state or
where you're going to be filing.

Now we'll have specifically what
those things are, what the dates
are that you're going to have to
send things in I make elections,

that sort of thing, and then
also what those filing fees are.
In terms of taxes, though, now
it starts being a little bit

more interesting. You have a
choice of either being taxed as
a partnership

or an S Corp

which should you choose
partnership or an S corp? Well,
that's one of those questions
where I'm gonna say you should

probably should talk to your
accountant. Because once we
start getting into how those
distributions happen, the answer

changes radically, whether
there's somebody should be doing
a partnership or an S corp, what
makes the most sense for them.

So that one is better to ask a
your personal account, who
knows, though, who knows your
situation, and what you're doing

much, much better than we could
possibly do on a module. In
terms of corporations, we can
also just have one person. In

most jurisdictions, there is
good asset protection, though
slightly different than in an
LLC. But the maintenance of them

tends to be fairly complex, you
need to have a board of
directors, that board of
directors may not do anything,

but they need to be there, they
need officers and there needs to
be all these rules that need to
take place. Now, while your LLC

will have an operating
agreement, your corporation will
have bylaws. Typically the
things that are required for a

corporation to stay active as
and look like a real company in
order to get that asset
protection that you want.

There's just more things you
have to do regular minutes have
to be taken from board meetings,
etc. So they're just more

complex, it's not to say that
it's not a, it's not the best
choice because it could be if
you need a very specific kind of

governance in order to look
right for investors than a
corporation is a perfect way to
set up. A REITs are always set

up as corporations in one of
their main entities. And then a
lot of times they have other
different structures in those

other entities as well. Also, if
you're going to be issuing
shares, rather than membership
units, so typically for like a

blind pool, you'll do it as a
corporation, because it's a
little bit easier to manage what
that looks like. And then taxes

is either your S corp

or C Corp.

So again, look at the handout
and to really kind of see what
would make the most sense for
your situation, and kind of

write out what's important to
you, you know, if you've got
more than one person, well,
you're not going to be doing a

sole proprietor. And you
probably shouldn't do a sole
proprietor anyway. Most of the
time, you're going to be

choosing between either an LLC
and a corporation. So let's go
and talk about common
structures. And we'll see how

this plays out a little bit
clearer. So, like I said, in a
there are two kinds of LLCs.
There are is a manager managed.

And this is just background, we
need to have the rest of the
conversation. And there is
member managed and it's probably

self evident. But an LLC that's
managed or managed is managed by
a manager manage an LLC that's
member managed is managed by its

members. What that means is all
the regular decision making that
takes place is either going to
be made by the manager or the

member. Now in the typical
structure that we do, typically
we are using, there are two
different layers of entities. So

we have your cindicator entity.

And I'm going to just draw that
and there is your hopes already
drawing the picture. And there
is your investment entity And

almost always, you will use
these kinds of structures.

So our syndicator entity is
typically either an LLC or a
corporation, I generally don't
see anything other than those, I

guess it could be an LLP in
certain situations. And, but
normally a syndicator themselves
is formed as either an LLC or a

corporation, because they want
to get the advantage of asset
protection, then your
investment, and today, that is

almost always an LLC, it's rare
that it's anything other than
analysis. So let's go into the
different kinds of structures.

So it all starts with you.

You are a syndicator.

So most are structured like
this, as the syndicator, you
have formed a syndication entity

in order to do your deals

and when you find that entity,
you when you find that you're
the investment that you're going
to do, you put together another

entity that is called your
investment entity

which your investors all invest
into.

Now, whether this is manager
managed, or member managed is,
is really up to you. Typically,
it will be a manager manage

entity. So that all the decision
making about how the investment
is run will primarily be made by
you. Now you may very well

decide things like when it's
time to sell or things like that
should be made by all of the
investors. That's perfectly

reasonable. And I do that most
of the time, those kinds of
decisions. But the decisions
about who to choose as a

property manager, or are those
kinds of things those typically
I just leave to management. And
I don't bring in the the the

investors.

So this is the most common
structure, this is probably what
you're going to be doing 95% of
the time, is a manager managed

investment entity with the
syndicator entity as the
manager. I will give you a
little background on why we

don't do it this way. So let's
say there is a great property.

And here's you as the
syndicator. And so you start
syndicating this property, you
find some investors to come into

the property, well, midway
through one of these investors
gets mad. And he decides that
the way this entity is being run

is just terrible. And so he sues
the entity and he sues you
because you are the manager. So
you can see that there is no

asset protection whatsoever on
this. And now you need to
respond to this lawsuit. The
other thing that can happen is

if there is somebody external,
who slips and falls on the
property, they're going to sue
the entity and they're going to

sue the manager of that entity
which could be you. So we are
trying to avoid that that isn't
a good solution for you. We want

to give you as much protection
And as possible now, the and
that's why we set it up with the
syndication entity. So let's go

back up here. Alright, so this
here, if there's a problem on
the entity, well, they can sue
the entity, and they can sue the

manager, but they can't sue the
manager of the manager. So
that's why you have that
cindicator entity there to act

as a buffer between you and your
investors. So you may be asking,
Well, that's all well and good.
But what about those situations

where there's multiple
properties that I'm going to be
syndicating? It's very simple.
It looks basically like this.

So here's your cindicator
entity. Now, in this case, so
say we've got two buildings, I
will still third building.

So you've got these three
buildings that you want to
invest in? How do you do that,
so that you can make it

something that is easy for your
investors.

To come into? Well, all we do is
we put together a single
investment entity

that you are the manager of em,
because it's just it's not a
property of an entity. It's just
a, it's just the entity itself.

And then each of these is its
own property entity. And then
your investors, they invest in
this investment entity. And

that's the typical structure for
what we do in in a pool
situation. To make sense. So
here's how to start thinking

about what makes the most sense.
First off, there's no reason to
not go ahead and get started in
file, that syndicator entity. As

soon as you're think I'm
definitely going to be putting a
deal together. There are a lot
of times costs that are

associated with not only putting
it together, but many
jurisdictions have taxes that
apply in the first year for

entity for the minimum
maintenance. So do know that if
you decide Yeah, I'm gonna go
for it, I'm going to put this

together, it is possible that
you're going to be paying some
costs. But it also is the way I
like to see it, it's raising

your hand to the universe
saying, I'm gonna do this, I'm
gonna make money, I'm gonna put
together some syndication. So to

me, it's like taking massive
action towards your future. So I
think it's a good thing in order
to form it right away, but you

need to decide for yourself
whether that makes sense. So, I
would first form this indicator
entity and as you start looking

for properties, then you can
start looking then when you
identify something, you can put
together the right investment

entity or property entity as it
see as would make the most sense
for you. So make that decision,
decide what entity type makes

the most sense for you, and then
start thinking about okay, well
that's how I would structure
this deal, probably in terms of

making it a man manager managed
entity managing one property
happens most of the time for for
new syndicators. In the next

module, we are going to talk
about how to find investors for
your syndication deal.