- Hi, Clint here with Anderson Business Advisors.
And in this video, we're going to discuss how
to hold your interest in a syndication for asset protection.
Okay, let's get started.
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Now, you know, I run into a lot of people
who are investing in syndication.
Maybe you're a sponsor of a syndication,
and I get this question over and over again.
How do I hold my interest?
Do I wanna hold that interest in my own name?
Should I be holding it through some entity,
maybe a corporation.
Well, it's really not that difficult
when you when you start analyzing and breaking it down
and using the same principles that we apply
to all our other investing,
you see a syndication, right?
It's typically set up as a limited partnership,
mainly a limited liability company.
So it's an unregistered security is what it is.
So if I asked you, where would you put your securities?
If you held in it,
say you had a shares of Apple Stock
or United Airlines, where should they be held?
in your personal name?
In your personal account?
Absolutely not.
Because if if you held them there,
they would be exposed to any potential lawsuit,
somebody could take them from you.
So what we tell people is you wanna set up
a limited liability company for that.
Typically, let me see if I've got a blue one here.
A lot of times we draw these out as blue boxes.
This would be a, a Wyoming LLC or Delaware,
and this would hold your safe assets is what we call it,
safe assets.
So stock is a safe asset,
Savings are a safe assets.
And you wanna just pile it in there?
Well, if I was considering investing
into a syndication right here,
this is that syndication LLC,
then why take it my own name over here?
When I could just as easily take it
in the name of this limited liability company,
or if you already have it, you can move it.
So when I'd want to take my interest,
and I would want to take it in the name of the LLC.
Now you might be wondering, well Clint it's an LLC
so it's already protected, right?
So thing happens on I'm I'm protected, correct,
you are protected there.
Where my concern comes in is with you.
Let's say, you know, you're down here, right?
And you didn't have this set up
and you own that syndication directly in your own name.
And you have this blue box that you've set up
and it holds your safe assets, your savings,
your brokerage account, things like that.
So you get sued individually.
Somebody gets a judgment against you for say $300,000.
Let's say you had to do with the loan default,
the bank comes after you
cause you had to walk away from one of your properties,
because you couldn't get the rents anymore
and the property had gone down in value,
So you're like, this doesn't make sense.
So they get this 300 K judgment against you,
deficiency judgment.
Now they want to collect on it,
well, the remedy available to a creditor
on this situation against an LLC is whether it's referred
to as a charging order, check my other out,
I got plenty of videos on LLCs and charging orders
that will describe how this works.
So I'm not going to go into detail on that right now.
But what I want you to understand is
that they get the charging order against you,
it's not going to allow them to take your assets here,
you're gonna hold onto these assets,
this is your limited liability company.
You're in control of it,
the only thing they're gonna get it
is if you decide to take a distribution, right?
So if I had $400,000 in this LLC set up right now,
and I have a charging order, that's placed on my LLC.
What the court tells you,
Mr. Clint understand
that if you choose to take a distribution
down to yourself of any of those funds
and tell any distribution you take must go to your creditor
and tell this $300,000 judgment is satisfied.
Do you understand what I'm saying?
You take any money out as a distribution,
almost a bag and thing.
Your honor, I understand you 100%.
If I take out a distribution,
I will pay it to my creditor until that
judgment's paid all.
Now, are you going to take a distribution
knowing that if I wanted to pull out $50,000
I have to pay it out to my creditor.
Heck no,
what are we gonna do?
We're taking loans is what we're doing.
No more distributions,
now they're coming out as loans or management fees.
I'm having some meetings
and I'm getting that money out of there.
And it's not coming out this way
that's going to be paying off my creditor.
So great, I have control over those ones.
But let's look what happens over here,
you got this LLC, the syndication, right?
That you've invested in,
let's assume that your distribution this year,
at the end of the year,
they're gonna give you out $30,000,
And they told you next year
they're going to have a liquidation event
and you should expect to receive $275,000.
You're like, Whoa, right on,
great I'm getting paid.
Well, that same charge in order that attached
to the blue box is also going to attach to that red box,
If you own that red box in your own name,
and they're gonna let the manager of that LLC
that promoter know,
hey, I have a legal claim against Clint,
I have a judgment against him.
Here's the charging order,
don't send Clint the $30,000,
don't send Clint the $275,000,
you send them to me because that money is owed to me.
Now I don't think you're going to be too happy about that.
You may call it the manager of the LLC,
you see, Hey, Hey Frank, this is Clint,
please don't issue out anything distributions to me.
(indistinct) Frank gonna tell you,
I've got 18 other members here investors,
you think I'm just going to hold back money
because you have a judgment.
No, I'm going to distribute the money,
I have to distribute the money because the syndication
the actual LLC agreement states
I need to distribute that money on an annual basis.
So you just lost your investment,
you may not see it yet, but when the money starts coming
it's going to those creditors.
So that is why when it comes
to holding the syndication interest,
don't hold it in your own name.
If you ever find yourself in a lawsuit,
they are going to attach that
and they know they're gonna get paid off of that one.
In fact, they may even just leave your blue box alone
because they know the blue box
isn't going to pay him any money cause you're in control.
But in this red box here, you have no control.
So that money's still gonna roll up down, down to you.
So that's why I'm recommending when you're
making an investment into a syndication
you own apartment building, commercial property,
hold it through an limited liability company.
So now when Frank sends out
that money kicks that 30 K comes into my blue box, right?
It's not going to my credit,
it's going to Clint.
Clint is control, what is Clint doing?
Loans, management fees.
I'm getting that money
but it's not going to be a distribution.
We have a liquidation event
275,000 comes into my blue box.
Doesn't hit me, it goes right to the blue box.
So when it comes to invest in syndication
if you are the promoter,
if you have an interest in this syndication
set up your own blue box, that's how you should hold it.
That's especially important for
people who set up these deals.
I've seen this happen a lot,
they will set up these deals and they own
this is their management entity right here,
actually is is a bad example let me, they go this way.
They have one entity just like this
and it's getting their promote,
they get a management fee on the side,
and then they're holding their interest in here as well
inside of this one company.
And then so they've got the,
this is syndication number one right here.
Then they create syndication number two right here,
and syndication number three down here.
And all of it rolls back into this company right here.
So if you are a promoter and you're setting
up your own syndication,
know this, that is gonna get you into some problems,
when it comes to a lawsuit
because there's high liability
or it's high risk, you understand that.
So they go after the promoter
and they sue the promoter's company,
what do you own?
Let's say had to do with this deal
that didn't work out the way it was supposed to.
And you know, even though you told people
probably wouldn't work out,
they invested with you and then it doesn't work out,
they say, well, I forgot he didn't tell me that.
And you really did, but it doesn't matter,
you still get sued over it.
They're going to hit this and they're going to hit this.
And if they hit this and it owns your interest in this,
in this, you just lost some wealth.
That's why take your ownership interest out,
put your ownership interest in any of these deals
in your own blue box,
keep your management side the promote side,
completely separate, okay,
of the ownership.
And that way you're ensuring
that you've given yourself adequate asset protection.
Come set up syndication
make sure you consult with a syndication attorney,
Anderson is not that, they will explain
to you the best way to set these things up.
But as far as your ownership, that blue box
I think is the way to go.
My name is Clint Coon with Anderson Business Advisors,
and in this video, we talked about how to hold an interest
in a syndication.
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