DEAL STRUCTURE
Create property deal structures using legal entities and vehicles with differing forms of ownership, capital stacks, acquisition, and management methods.
During our FINC 676 class, Dox Consulting, LLC. (our group) was tasked with creating an optimal Deal Structure & Entity Selection which would adequately suit our client(s). Entity selection is quite important in that it determines who or whom leverages more risk and liability within the deal. In this case, our group analyzed the given assumptions in order to come up our optimal deal structure.
We recognized that the company will be making less than $1,000,000 therefore will not have to pay any franchise tax.
Additionally, we assumed our foreign investor partners were entrusting us, and would provide a non-recourse loan.
We decided not to use the “S” corp. due to the fact that our investors are non-U.S. citizens, nor did we wish to use a general partnership due to maximum liability purposes.
We chose not to use a “C” corp. in order to avoid double taxation.
As a team, we did not wish to have a sole proprietorship since such entity is for only one individual, and this entity would need to require more than one person.
In the end, we recommended forming a Limited Liability Company (LLC). The main benefit, as implied by the name, is all the members within the deal will have limited liability. Based on the fact that our group was pursuing a Non-Recourse Loan, it was apparent that those involved in the deal wanted to limit their liabilities as much as legally possible. Additionally, we decided that all six individuals involved in the deal needed to have decision making power. Thus, we advised that the six individuals became Member-Managers of the LLC. As a Member-Manager each is individual is provided with equal decision-making rights.
Click below to view the full deal structure report created by Dox Consulting, LLC.