LLC AND taxes for Syndication Participation

6 Replies

Im participating/investing in a multi family syndication for the first time. What are the best practices for participation? Should I create and LLC for the investment? Should I create and EIN and a business checking account for the LLC? Any tax reporting things to keep in mind for my accountant? Any other tips?


Glad to hear you have an accountant.   I recommend you talk to them as they will know your personal situation better.  Ideally, you would talk to your lawyer too.

Personally, I have invested in MF syndications many ways, my personal name, as husband and wife, and as an LLC. There is no single best answer. It will depend on your personal situation, goals, and objectives.

Another factor is the syndicator. How much do you trust them to run the business appropriately? (If you aren't confident, I wouldn't invest with them.) The property itself normally would be in an LLC and that LLC should be properly maintained to provide liability protection for the investors.

@Jared F. as a syndicator myself we have had investor both personally invest and use an LLC. I am not an account or know your personal goals with investing. If you plan do to a lot of passive investments my opinion is to set up Jared F. Investing, LLC and run everything through it. It is a lot cleaner and could help your account when it comes to filing taxes.

I also agree with @Greg Scott , talking to your lawyer will give you a better insight and direction to go. 

Happy investing and would love to know which direction you decided to go.

Hi Jared,

I echo the advice in this thread about the LLC vs. investing in your personal name. As for the tax reporting, you should receive a K-1 at the beginning of 2019 to give to your accountant for tax purposes. That would be a good question to ask the GP: when will you be sending out the Schedule K-1s?

@Jared F.

You should consult an attorney when it comes to asset protection.

A couple questions you want to ask the syndicator is how the entity is structured.
If the entity is structured as an LP or an LLC - you are likely a non-managing member or a limited partner.
So the question you would then ask the attorney is if you have additional protection investing as a limited partner/non-managing member in your individual names or as an LLC.

I have seen individuals invest hundreds of thousands of dollars in syndicated deals. I would have to assume their liability is limited to the amount of their contribution. However, always good to talk to an attorney as every deal is unique.

I agree that you should consult a lawyer. If you decide to file as an LLC, I can certainly lend my expertise on that matter. Let me know if you would like to get in touch.

@Jared F. As many people alluded here you're investing in a syndication as a limited partner. You're not personally liable for any actions of such company. As a general rule of thumb syndications are structured as LLC's and offer you protection through such entity.

At the end of the day, consulting with asset protection attorney on your personal situation will be your best bet!