20 years ago, almost all
syndications and investment

funds used limited partnerships.
Instead of limited liability

companies that has changed the
landscape is different. Now, the

vast majority of them use
Limited Liability Companies

instead of limited partnerships.
So what makes the most sense for

you for your syndication for
your investment fund, I'm gonna

give you some thoughts about
what the advantages are, what

the differences are, and then
you can decide for yourself what

you think might be the best pick
for your syndication or

investment.

My name is Tilden Moschetti. I
am a syndication attorney with

the Moschetti Syndication Law
Group. We specialize in putting

investment funds syndications
together for syndicators,

investment fund managers, help
them make sure that they are

successful. And it's part of
that what we do is spend a lot

of time on the structure, not
only on how to split, how

distributions happen, and how
all the rights and things like

that, but even from the very top
level, what's that entity

structure look like? And one of
the key things that's often

asked at the very beginning of
an engagement is, Well, should

we do it as a limited liability
company? Or should we be a

limited partnership? Now, there
are some differences, some major

fundamental differences, and
they might not be the ones that

you would think. So the first
main difference between the two

comes down to taxation. Now, you
might think that the taxation is

the same, right? They're both
taxed as partnerships. Well, in

liability, limited liability
companies have the option of to

be taxed as a corporation, but
most of the time, you don't do

that. Right. So they're the same
thing? Well, actually, no, they

are still different. So the tax,
the IRS treats partnerships,

different still based on whether
it's an LLC or a limited a

limited partnership. And the
reason is that nuance, they're a

little bit different, there are
actually two different kinds of

people there do different kinds
of entities. So for example, an

LLC has straight pass through
taxes, it's very clear cut, you

get your K ones, it's all
spelled out there. On the

partnership return for a limited
partnership, it can be different

general partners are treated a
little differently than limited

partners. Now, this has
advantages, some limited

partnerships are set up to pass
specific credits through that

can only go to limited partners,
but the general partner itself

and that's you the sponsor,
right. So may have to claim

income and may not get some of
the depreciation benefits,

because it's the general partner
and not the limited partner. So

it may not be as efficient as a
tax vehicle for, for you as a

sponsor, it'll certainly be more
beneficial for the for your

limited partner, but not
necessarily for you. The second

difference is management. So
LLCs are incredibly flexible, we

can tool them and change them
and move them around to really

be a construct a whole structure
of what makes the most sense for

your syndication or the fun.
Limited Partnerships have much

less, the general partner is in
complete control. That's it end

of story that may not fit with
what some investors need in

order to come in. And that's why
we've I why I think we've seen

the shift from limited
partnerships to just to limited

liability companies over the
past 20 years. The third change,

and this is also very important
for you as a sponsor is

liability protection, you might
think because it's called

limited partnership that you
have liability protection as a

general partner yet don't, there
is no liability protection for

general partners of a limited
partnership, they will have that

as part of limited liability
company, but you don't as a

limited partnership. So a lot of
times, you may go into thinking

that you want to be a limit an
LP structure, but then you

realize that now you've got this
huge amount of exposure, and we

have to build out some
additional walls in order to

protect you and your assets. So
some of the advantages of an LLC

are this. So you get the
flexibility in the structure,

like I talked about, we can make
it look like however you want it

to look like you've got the
straight pass through taxation

that makes it very clear that
all taxes just get passed

through to the individual
partners themselves whether

they're taking on a more LP role
or a GP role. It doesn't matter.

It all passes through, there's
this asset protection of the GP

of the person in charge of you,
the sponsor is there as part of

a limited liability company.
Now, we still take the extra

step of building in a
sponsorship entity, as you've

seen in my other videos, to make
sure that that protection is

there very, very strongly for
you. But it's very clearly

delineated. But also, the
advantage is, it's a clear

distinction between your
business assets are the assets

of the LLC, are very different
than the assets of you

personally, as a person, you
don't have that same level in a

limited partnership, if you're
the GP. And the lastly of the

advantages of an LLC is that
ease of formation and

maintenance, they're just plain
simpler. The laws of LLCs are

very, very similar across all of
the states, the only thing that

changes are very subtle nuances
between what's there and what

what's necessary and things like
that. But there, it's it's very

straightforward about how those
are done. Limited Partnerships

doesn't have that advantage
there, to me much more complex.

And the structure itself is like
is like building a giant tower

that may tend to wobble a little
bit, especially when we take

into account the nuances of
local state laws. But there are

advantages to a limited
partnership. Like I said, there

are specific tax savings that
are only available to limited

partnership organizations, so
that those flow through the the

taxes that are there, for
example, there's some like an

asset, some equipment,
depreciation, things like that

are only available through
limited partnerships. And so if

that's a key component of the
structure itself of your

syndication or fun, you might
choose to do a limited

partnership. And the second
reason that you might do a

limited partnership is there
definitely is a very clear

delineation of these people are
limited partners. This person is

the general partner, which gives
you the sense of okay, well,

that means I really am the only
decision maker in this reality

is though, we can change that in
an LLC operating agreement to

give you the sponsor still
essentially the same amount of

control and rights that you
would have in a limited

partnership with just a very
small amount of weakness, right,

the amount of risk that's
created by that weakness, in my

opinion, generally, and this may
not apply to your specific

situation. So talk to your
attorney before proceeding is

that the nuance isn't worth the
difference in going to the

limited partnership versus a
limited liability company. At

the end of the day, almost
always I recommend people doing

a limited liability company.
There's only specific nuances

which may or may not apply to
you and to your particular

situation. My name is Tilden
Moschetti. I am a syndication

attorney with the Moschetti
Syndication Law Group. If we can

help you with your syndication,
or investment fund, whether you

think it really shouldn't be a
limited partnership, or you're

going to go with a limited
liability company, we can help

you either way, make sure that
you're set up properly, that you

get the right amount of
compliance. But also, most

importantly, at the end of the
day, you have somebody who's

experienced and somebody who has
actual boots on the ground

experience, because I do my own
deals. I've been in your shoes,

I've had to make the choice for
myself on whether to do a

limited liability company or an
LP. I am live with the

consequences of that decision,
which fortunately has been an

LLC so there hasn't been
negative consequences. But we

can help you as well. Give us a
call if you'd like to talk about

your project, and we can take it
from there.