A syndicate is an organization of investors pooling capital for real estate investment. Syndicates can take the form of a corporation, a full partnership or, the most popular, a limited partnership. A typical syndicate combines the money of the individual investors with the management expertise of a sponsor, known as the general partner, and follows a three step cycle: acquisition, operation and disposition.
In California, the Department of Corporations regulates control of syndicates. Under the Corporation's Code, real estate brokers may engage in the sale of real estate syndicate security interests without obtaining a special broker-dealer license. However, all such sales must be made under strict adherence to the full disclosure provisions of the California Uniform Partnership Act. In addition, the California Corporations Code, Section 15507, states that a limited partner may become liable for the total debts of the partnership if the limited partner takes an active role in management.
Syndicates are considered to be investment conduits that pass profits and losses to investors in proportion to their ownership shares. Any tax liabilities are imposed at the investor's level. Intrinsic in the design is the investors' liability for debts of the partnership, which are usually limited to their investment. The income from these syndicates, or limited partnerships, is considered passive by the IRS.
In the 90's, a new form of business organization, a limited liability company, or "LLC," was introduced which combines the single-level tax benefit of a partnership with the organizational structure and limited liability of limited partnerships and corporations. Members of an LLC can participate in running the organization without becoming personally liable for business obligations.
In California, an "articles of organization" form must be filed with the Secretary of State to establish an LLC. The LLC format may incur higher fees and taxes than general or limited partnerships
Corporate bonds are credit instruments used to raise long-term funds. When these bonds are backed by a mortgage on specifically described real
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