Selling partial beneficial interest in a trust, Do I need a PPM ?

Question

If I buy a property in a Land Trust,

Or if I originate a note in a Land Trust,

Then sell partial beneficial interest in the Land Trust to multiple individuals,

Do I need a PPM and need to have this passed by the SEC ?

Mauricio Rauld · Answer

And @gregscott is correct.  The actual structure (ie: land trust) is irrelevant.  The SEC defines a security very  broadly and essentially any time you take monies from investors where the returns are generated by your efforts, you are dealing with a security.

Mauricio Rauld · Answer

The way you describe it, you are definitely issuing a security.  When that is the case, you need to either 1) Register the Securities with the SEC, 2) Find an exemption to registration or 3) it is illegal. With what you are trying to do, there may be some structures we can come up with in order to avoid the securities world, but would need to dig into detail.

Greg Scott · Answer

Disclosure:  I'm not a lawyer; check with an SEC attorney

I don't think the concept of a Land Trust is relevant to the issue.

The key question is are the investors actively engaged in managing the property?  If you have divided the duties and, for example, one does the rehab, one manages the finances, and one manages the tenants, then you have a partnership.   If one or more investors just pays money and expects to get a profit based on others' efforts, you have created a security and SEC laws apply.