Our Client Stories

Example #1: Singapore Investors, multiple owners

In this example, we had a group of 7 investors who all wanted different things. They had pooled money for the first couple of projects, but as things went on, only a few investors wanted to participate in future purchases, and some new investors wanted to come into the group. Here’s what we created for them:

A.   The Parent LLC was owned by the 7 original investors equally. It is taxed as a Partnership under US law. The LLC files a tax return and each of the 7 investors receives a form, Called a K-1, showing his or her share of taxable income to be reported on individual tax returns.

B.   The 7 original investors put their first 3 investment properties, purchased in Georgia and Florida into separate Cells under the Parent LLC. Because the ownership is common, we were able to consolidate the income and expenses for each Cell onto the Parent LLC’s tax return. So even though the Parent LLC and Cells would be looked at as 4 separate entities legally, for tax purposes they are one structure. This simplifies and lowers tax return costs for the group.

C.   The property in Cell #4 was owned by just 3 of the 7 investors. That makes it a separate Partnership for tax purposes. Because it has different ownership, Cell #4 will need to report its income and expenses on its own Partnership tax return. Each investor in Cell #4 will receive a separate K-1 showing his or her share of the taxable income from the operations of this Cell.

D.   The property in Cell #5 was purchased by one investor from the group, and 2 new, outside investors. Because a Series LLC is permitted to have separate and independent ownership of the Cells, we were able to create a new Cell just for this purpose. As with Cell #4, we must treat this new Cell as a separate Partnership for US tax purposes. It will report its income and expenses onto its own Partnership tax return. Each investor in Cell #5 will receive a separate K-1 showing his or her share of the taxable income from the operations of this Cell.

It is quite permissible for an investor to receive multiple K-1 forms. In this scenario, one of the investors will actually receive 3 separate K-1 forms, for the Parent LLC, Series #4 and Series #5