Real Estate Investment Group Setup

Summary

Forming an investment group in California involves choosing a legal structure like an LLC or corporation, complying with securities laws, and understanding liability and tax implications. Non-profits cannot distribute profits but can offer non-monetary benefits. Program-Related Investments (PRIs) allow non-profits to receive loans for social impact, with potential tax deductions for investors. Proper documentation and IRS compliance are crucial. Consider consulting a local attorney for personalized guidance.

Full Conversation

I have a real estate investing private practice just me and I wanted to understand if I expand it into an investment group or club or consortium for social impact projects what is the legal difference than just me as a legal entity investing in real estate on my own and maybe having joint ventures on certain projects to find social impact efforts
Hi ****! Expanding into an investment group, club or consortium involves different legal considerations compared to individual investments. Here are some key points:
- Legal Structure: You'll need to choose a legal structure (LLC, partnership, corporation).
- Regulation: Compliance with securities laws if raising funds from investors.
- Liability: Potentially different liability protections.
- Taxation: Different tax implications based on structure.
Where are you located? This can help tailor the information to your specific jurisdiction.
But doesn't compliance only kick in at a certain level of how big investment is
Compliance with securities laws can indeed depend on factors like the amount raised and the number of investors. Here are some general points:
- Regulation D: Provides exemptions for smaller offerings.
- Crowdfunding: Limited to specific amounts.
- State Blue Sky Laws: Vary by jurisdiction.
Where are you located? This will help tailor the information to your specific jurisdiction.
Los Angeles California
Since you're based in Los Angeles, California, here are some specific points to consider:
- Legal Structure: LLCs and Corporations are common for investment groups.
- Securities Regulation: California has its own "Blue Sky" laws.
- Regulation D: Federal exemptions for smaller offerings.
- Crowdfunding: Limits apply to how much can be raised.
Would you like more information on specific legal structures or compliance requirements?
Yes
Sure, here is more information on specific legal structures and compliance requirements for forming an investment group in Los Angeles, California:
- Legal Structures:
- LLC (Limited Liability Company): Offers flexibility, limited liability, and pass-through taxation.
- Corporation: Provides limited liability and is more suitable for larger groups, but has double taxation.
- Partnership: Easier to form but offers less liability protection.
- Compliance Requirements:
- Regulation D: Exemptions under Rules *, *, and * for smaller offerings.
- California Blue Sky Laws: Specific state securities regulations.
- Crowdfunding: Federal limits on the amount that can be raised and the number of investors.
Would you like more detailed information on any of these structures or compliance requirements?
I it doesn't matter if I call it a consortium a group of club or a non-profit
When forming an investment group, club, consortium, or non-profit, the legal structure plays a critical role. Here are a few distinctions:
- Consortium/Club/Group: Typically informal, but formalizing as an LLC or Corporation is advisable for liability protection.
- Non-Profit: Focuses on social impact, requires strict compliance with non-profit regulations, and cannot distribute profits to members.
Would you like more tailored information on forming a non-profit or the steps to formalize a consortium/group?
We can a non-profit payout dividends to members of their non-profit
In the United States, including California, non-profit organizations are generally prohibited from distributing profits (dividends) to their members. Here are some key points:
- Non-Profit Structure: Designed for social impact, not profit distribution.
- Tax-Exempt Status: Must reinvest profits into the organization's mission.
- Compliance: Strict IRS guidelines prohibit profit distribution to members.
Would you like more information on alternative structures that allow profit distribution?
You're the lawyer supposed to help me figure out how to do these things because I believe that I might be able to not pay out dividends to members but it could be a an exchange for access to something else or
In a non-profit structure, while direct profit distribution (dividends) to members is not allowed, certain benefits can still be provided.
- Membership Benefits: Non-profits can offer access to events, resources, or other non-monetary perks.
- Reinvestment: Any profits should be reinvested into the mission of the non-profit.
- Compliance: Ensure compliance with IRS guidelines to maintain tax-exempt status.
Would you like more detailed information on how to structure these benefits within a non-profit?
Is there a possibility that you can look at their investments as a loan to the nonprofit and any additional capital is then paid back to them so to speak even though their principal remains in the nonprofit like say if they make a *% gain on whatever that is then that seat investment stays in but they can take the *% as a portion of the loan that is owed
In a non-profit structure, it is possible to structure investments as loans. Here are some key points:
- Program-Related Investments (PRIs): Loans can be made to the non-profit, and any returns (like interest) can be paid back.
- IRS Compliance: Ensure that these transactions comply with IRS guidelines to maintain tax-exempt status.
- Documentation: Properly document the loan agreement to clarify terms and avoid any issues.
Would you like more detailed information on Program-Related Investments (PRIs)?
Sure
Program-Related Investments (PRIs) offer a way for non-profits to receive funds while providing returns to investors. Here are some details:
- PRIs: Loans/investments made primarily for charitable purposes, not profit.
- Returns: Can include interest, but the primary aim should be social impact.
- Compliance: Must adhere to IRS guidelines to maintain tax-exempt status.
- Documentation: Clear loan agreements are crucial.
Would you like guidance on drafting a PRI agreement or exploring other funding options?
Yes

Los Angeles County Bar Association


Phone: (*) *-*
Website: www.lacba.org

Would you like guidance on drafting a Program-Related Investment (PRI) agreement, or would you prefer exploring other funding options for your non-profit?
Are there benefits doing the program related investment or is a non-profit investing group just a silly ideal around or is there a creative way to structure things to be able to make it work so there can be tax deductible right offs and given and there's also other benefits that might be worth it I don't know where options
There are benefits to using Program-Related Investments (PRIs) for non-profits. Here are some key points:
- Tax Deductions: Loans to non-profits for charitable purposes can be tax-deductible.
- Social Impact: PRIs focus on achieving social goals.
- Returns: Investors can receive interest, though the primary aim is social impact.
Would you like more detailed information on setting up a PRI for your non-profit?