Q. My syndicate is structured with 2 classes of Members. Class A is for cash-paying investors. Class B is reserved for management. If I am participating in management and earning Class B interests, how should I take title to them?
A. There are tax reasons you may want to take your class B Interests separate from your management interests (as your earnings from the Manager LLC will be taxed at ordinary income rates and your Class B earnings may be taxed at capital gains rates), so you should speak to your CPA about this before making your decision. Additionally, if the Manager is removed, having it also serve as the Class B Member may give your investors a stronger argument about also removing your Class B Interests. If your management interests and Class B Interests are taken separately, it may be much harder for this to happen.
Additionally, if you have an asset protection entity, you may wish to use it to take title to your Class B Interests, which carry little liability by themselves. Conversely however, you would never want to use your asset protection entity to take title to your interests in the management entity as those interests carry significant liability and any assets associated with that entity are subject to attachment if the manager were to be sued.
print

Download now!

FREE EBOOK RESOURCE

Are You Raising Private Money LEGALLY?

Would You Like to Have More Investors Than You Need

Download our Definitive Guide to Syndication and Raising Money for Real Estate and Small Business!

An added bonus: download the ebook, give us and our ebook a review here, and receive a FREE investor template.