Looking for perspectives on setting up JV for note purchase

5 Replies

I've got a local private lender who wants to do a joint venture with me to fund a NPL. He's funding the deal and expenses, I'm doing the diligence, acquisition, workout, etc. We then split the profits.

This may turn into a multi-asset situation down the road, but right now we are just doing one note, which really doesn't justify a full LLC setup. I thought about doing this in a Personal Property Trust, but still would need to get a fed tax ID, open a bank acct. etc. Trying to keep it as simple as possible on the operations side.

Does anyone have any thoughts on a simple but safe setup? It will be my company and him personally. 

Best Regards, 

Bob

Hey Bob,

This is something that I have pondered too.  I ended up creating a separate business entity, but I suspect there is a better way to do it.  I would like to look more deeply into using a Series LLC for this type of thing.  I think there is inherent risk in doing this within your existing entity, primarily because if things go wrong and your partner sues you, the assets of your current entity are exposed.

Mike

Bob;

Lawyers look for naked people who have NO protection.  You seriously need to make time to open bank account, get an EIN online and file a corporation in Wyoming for $150 bucks.  Wyoming?  NO TAX.   If you don't have tie, won't have time, or feel challenged in any way, please have your investor call me - I have those three simple documents/instruments and I sleep like a baby.

Good point @Mike Hartzog, thanks. On the other Mike's comment I agree. I've set up a dozen LLCs over the past 20 years so it's not that big of a deal, just that I already have 6 going already, trying to determine the simplest method with the most protection. Looks like a personal property trust would provide us the framework with each of our LLCs as the beneficiaries. This would enable a few layers of asset protection and an entity to take assignment of the note without the overhead of an additional LLC. If we end up buying more notes together, then we can go thru the LLC gyrations.

Mike I'm glad that you sleep like a baby, although waking up every few hours crying and screaming must get cumbersome! ;^)

Bob

Most hedge funds won't sell to an individual so you will likely need a corp entity anyway.  If you are thinking he might want to add more notes/properties latter you might as well get the work donjon the front end so you don't have to scramble latter.

Right now we will set this up on a personal property trust (similar to land trust fyi) with my company/investor as the beneficiaries. Then we can assign the note it to our LLC if/when that requirement is needed.

Thanks for all of your input!

Bob

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