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20 years ago, almost all
syndications and investment

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funds used limited partnerships.
Instead of limited liability

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companies that has changed the
landscape is different. Now, the

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vast majority of them use
Limited Liability Companies

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instead of limited partnerships.
So what makes the most sense for

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you for your syndication for
your investment fund, I'm gonna

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give you some thoughts about
what the advantages are, what

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the differences are, and then
you can decide for yourself what

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you think might be the best pick
for your syndication or

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investment.

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My name is Tilden Moschetti. I
am a syndication attorney with

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the Moschetti Syndication Law
Group. We specialize in putting

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investment funds syndications
together for syndicators,

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investment fund managers, help
them make sure that they are

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successful. And it's part of
that what we do is spend a lot

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of time on the structure, not
only on how to split, how

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distributions happen, and how
all the rights and things like

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that, but even from the very top
level, what's that entity

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structure look like? And one of
the key things that's often

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asked at the very beginning of
an engagement is, Well, should

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we do it as a limited liability
company? Or should we be a

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limited partnership? Now, there
are some differences, some major

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fundamental differences, and
they might not be the ones that

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you would think. So the first
main difference between the two

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comes down to taxation. Now, you
might think that the taxation is

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the same, right? They're both
taxed as partnerships. Well, in

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liability, limited liability
companies have the option of to

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be taxed as a corporation, but
most of the time, you don't do

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that. Right. So they're the same
thing? Well, actually, no, they

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are still different. So the tax,
the IRS treats partnerships,

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different still based on whether
it's an LLC or a limited a

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limited partnership. And the
reason is that nuance, they're a

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little bit different, there are
actually two different kinds of

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people there do different kinds
of entities. So for example, an

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LLC has straight pass through
taxes, it's very clear cut, you

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get your K ones, it's all
spelled out there. On the

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partnership return for a limited
partnership, it can be different

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general partners are treated a
little differently than limited

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partners. Now, this has
advantages, some limited

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partnerships are set up to pass
specific credits through that

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can only go to limited partners,
but the general partner itself

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and that's you the sponsor,
right. So may have to claim

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income and may not get some of
the depreciation benefits,

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because it's the general partner
and not the limited partner. So

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it may not be as efficient as a
tax vehicle for, for you as a

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sponsor, it'll certainly be more
beneficial for the for your

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limited partner, but not
necessarily for you. The second

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difference is management. So
LLCs are incredibly flexible, we

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can tool them and change them
and move them around to really

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be a construct a whole structure
of what makes the most sense for

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your syndication or the fun.
Limited Partnerships have much

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less, the general partner is in
complete control. That's it end

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of story that may not fit with
what some investors need in

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order to come in. And that's why
we've I why I think we've seen

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the shift from limited
partnerships to just to limited

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liability companies over the
past 20 years. The third change,

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and this is also very important
for you as a sponsor is

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liability protection, you might
think because it's called

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limited partnership that you
have liability protection as a

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general partner yet don't, there
is no liability protection for

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general partners of a limited
partnership, they will have that

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as part of limited liability
company, but you don't as a

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limited partnership. So a lot of
times, you may go into thinking

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that you want to be a limit an
LP structure, but then you

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realize that now you've got this
huge amount of exposure, and we

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have to build out some
additional walls in order to

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protect you and your assets. So
some of the advantages of an LLC

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are this. So you get the
flexibility in the structure,

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like I talked about, we can make
it look like however you want it

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to look like you've got the
straight pass through taxation

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that makes it very clear that
all taxes just get passed

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through to the individual
partners themselves whether

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they're taking on a more LP role
or a GP role. It doesn't matter.

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It all passes through, there's
this asset protection of the GP

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of the person in charge of you,
the sponsor is there as part of

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a limited liability company.
Now, we still take the extra

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step of building in a
sponsorship entity, as you've

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seen in my other videos, to make
sure that that protection is

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there very, very strongly for
you. But it's very clearly

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delineated. But also, the
advantage is, it's a clear

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distinction between your
business assets are the assets

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of the LLC, are very different
than the assets of you

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personally, as a person, you
don't have that same level in a

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limited partnership, if you're
the GP. And the lastly of the

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advantages of an LLC is that
ease of formation and

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maintenance, they're just plain
simpler. The laws of LLCs are

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very, very similar across all of
the states, the only thing that

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changes are very subtle nuances
between what's there and what

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what's necessary and things like
that. But there, it's it's very

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straightforward about how those
are done. Limited Partnerships

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doesn't have that advantage
there, to me much more complex.

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And the structure itself is like
is like building a giant tower

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that may tend to wobble a little
bit, especially when we take

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into account the nuances of
local state laws. But there are

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advantages to a limited
partnership. Like I said, there

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are specific tax savings that
are only available to limited

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partnership organizations, so
that those flow through the the

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taxes that are there, for
example, there's some like an

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asset, some equipment,
depreciation, things like that

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are only available through
limited partnerships. And so if

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that's a key component of the
structure itself of your

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syndication or fun, you might
choose to do a limited

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partnership. And the second
reason that you might do a

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limited partnership is there
definitely is a very clear

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delineation of these people are
limited partners. This person is

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the general partner, which gives
you the sense of okay, well,

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that means I really am the only
decision maker in this reality

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is though, we can change that in
an LLC operating agreement to

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give you the sponsor still
essentially the same amount of

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control and rights that you
would have in a limited

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partnership with just a very
small amount of weakness, right,

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the amount of risk that's
created by that weakness, in my

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opinion, generally, and this may
not apply to your specific

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situation. So talk to your
attorney before proceeding is

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that the nuance isn't worth the
difference in going to the

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limited partnership versus a
limited liability company. At

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the end of the day, almost
always I recommend people doing

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a limited liability company.
There's only specific nuances

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which may or may not apply to
you and to your particular

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situation. My name is Tilden
Moschetti. I am a syndication

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attorney with the Moschetti
Syndication Law Group. If we can

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help you with your syndication,
or investment fund, whether you

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think it really shouldn't be a
limited partnership, or you're

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going to go with a limited
liability company, we can help

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you either way, make sure that
you're set up properly, that you

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get the right amount of
compliance. But also, most

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importantly, at the end of the
day, you have somebody who's

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experienced and somebody who has
actual boots on the ground

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experience, because I do my own
deals. I've been in your shoes,

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I've had to make the choice for
myself on whether to do a

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limited liability company or an
LP. I am live with the

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consequences of that decision,
which fortunately has been an

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LLC so there hasn't been
negative consequences. But we

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can help you as well. Give us a
call if you'd like to talk about

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your project, and we can take it
from there.