Who should set up a GP/LP structure for real estate businesses in Canada? This structure for real estate investing is definitely aimed at serious real estate investors. Now, don’t feel offended if you’ve never had one, don’t need one, or simply don’t want one – that’s perfectly fine. However, if you’re open to additional costs and opportunities that align with your evolving business goals, the GP/LP structure might be worth exploring.
Video Transcript: Who should set up a GP/LP structure
So who should be considering a GP/LP structure?
I’m George Dube, saving the world from tax, one bow tie at a time.
First and foremost, I certainly believe that it’s for more serious investors. And don’t be offended by the fact you may never have one, you may never need one, you may never want one. That’s fine, absolutely fine. But for some extra costs and opportunities, it may fit in with what you’re doing, with what you want to evolve to.
So, and again, this is not something written in the Income Tax act or something to that effect, but I tend to see the LP structure used more so where there’s
- More than five investors getting involved in a project or
- Simply that the founders are looking to try and create a structure, so that those other investors do not have to guarantee mortgages or funds and debt.
- I also tend to see it more more from a marketing perspective almost, where a number of investors, they’re to some degree almost taught it seems to me, that they should be looking for a flow through opportunity.
And we can agree or disagree on whether that’s a good idea for them. But if it’s the difference between getting a half million dollar check and not getting the half million dollar check as an investment, I’d be pretty clear that that GP/LP structure will be there pretty quickly, if that’s a difference between success and maybe not as great of a success.
So overall, where you’re looking for a little bit larger projects, more diversification perhaps some more sophisticated investors, I think this is something you should certainly be looking into.
But to be fair, I work with a lot of very, very successful investors that never have had and never will have a GP/LP structure. But I also work with a number I think could have been more successful with that structure.
No question, this series of recordings on the GP/LP structuring, 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.
If you want to learn more about this topic, check out our GP/LP playlist or head over to my website, georgeedube.com.
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.
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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
- How to set up a GP/LP structure
Back to: GP/LP structure: Ultimate guide for Canadian real estate investors
More questions?
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Remember – circumstances are unique! This information is summary in nature. Seek out advice from your tax advisor about your specific situation.
