Real estate investors looking to grow will often ask me how to set up a GP/LP structure. In the video below, I outline at a high-level the 4 steps real estate investors should you take to set up a General Partner/Limited Partner structure for their business in Canada.
Video Transcript: How to set up a GP/LP structure
So an obvious question is, what’s next? How do we actually start the process of setting up the GPLP structure?
I’m George Dube, saving the world from tax, one bow tie at a time.
So first, let’s start talking with your accounting team, the legal team, the financing team.
Second, we haven’t talked about I’m not an expert at this component. Let’s ensure that any securities legislation has been addressed. We don’t want to find out after the fact, we’ve skipped some steps and you’re on somebody’s bad side.
The third part to this is clearly developing a strong business and investment plan. That’s going to be crucial as we get into the fourth step of really starting to kick off the creation of the structure itself, creating the limited partnership agreement.
I found through experience that those who don’t really have a strong idea of how they want to divide the profits, create the opportunity, we end up going through a lot more series of revisions, more revisions, more revisions. And every time the agreements are changed, the lawyers are involved, the tax advisors are involved, and guess who pays for all that?
So you’re going to be a lot happier with some strong ideas of what you would like to see.
Then consider the advice provided by the legal, tax, financing teams. It’s not to say don’t change the agreements. I don’t think I’ve ever seen draft number one be the final agreement, but you also don’t want to have, in my personal opinion, drafts 10 and 15 and 20. You’re aiming for a much smaller set of revisions.
And down the road, as you’ve created your template for the future and the future, meaning limited partnership number 2, 3, 18, et cetera. Unquestionably, you’re going to tweak the original agreements, the terms, the split of profits, who’s involved. But in an ideal world, we’re not starting from scratch.
No question, this series of recordings on the GP/LP structuring (GP/LP playlist), is very high level, not a lot of detail.
Please feel free to reach out, set up a time to talk further and we can get into the nuts and bolts for what’s right in your specific situation.
Have more questions? Please subscribe, follow and even share. I want all of us to have the tax information that we need to do wonderful things.
-End transcript-
Resources
For additional resources related to setting up a GP/LP structure:
- What is a GP/LP structure?
- GP/LP structure growth: Simple to complex
- Who should set up a GP/LP structure?
Back to: GP/LP structure: Ultimate guide for Canadian real estate investors
More questions?
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