How much does it cost to setup a deal?
We charge $9000 per Syndicated deal that covers the charges of our back office team who manages all the legal aspects of your Syndicate for its lifetime. Since every deal you run is considered a separate Syndicate, each deal incurs the $9000 cost.
The $9K set up cost is distributed across all of the LPs who participate in a given deal on a pro-rata basis based on their investment amount.
Who pays the setup costs of the deal?
As mentioned earlier, the setup costs are distributed across all of the LPs who participate in a given deal, on a pro-rata basis based on their investment amount. Therefore the LPs who invest more will also be required to pay higher setup fees. The $9k fund expense includes the SPV en masse. This implies that each LP in the SPV will cover a fraction of the fee in proportion to their investment. For instance, an LP that contributes 40% of the total SPV, will bear 40% of the setup fee.
What’s the minimum allocation I need to run a deal?
Lilypads will run deals with lower allocations of $80,000 or $40,000 for pro-rata deals as it is our recommended minimum allocation that keeps setup costs below 10%.
The Setup cost is usually distributed across all LPs on a pro-rata basis on their investment amount – If you wish to, you can cover all parts of the setup cost.
What are the limitations on Syndicate investments in certain foreign companies (PFIC and CFC)?
Investments in certain types of foreign real estate assets are governed by arbitrary tax treatments and ongoing compliance requirements. Therefore, these rules are typically complicated. But if the investment is in a foreign holding real estate vehicle, it may be a Passive Foreign Investment Real Estate vehicle, PFIC. On the other hand, if the investment is in a Real Estate Foreign vehicle that is predominantly owned by US taxpayers, it may be a Controlled Foreign Corporation (CFC).
Therefore, due to numerous tax and compliance burdens, Lilypads does not currently assist in PFIC or CFC investments. When a Syndicate invests in a non-US real estate vehicle, the vehicle will be asked to confirm that it is neither a PFIC nor a CFC. Moreover, it must concede to the continuing compliance requirements.
Besides, a Lead should confirm in the rudimentary stages itself, the PFIC/CFC status with a foreign vehicle. This helps to avoid the wastage of resources. Any investment in a vehicle that cannot validate its PFIC/CFC status, is either not facilitated by Lilypads or will require additional approvals from Lilypads
What additional tax documents should I submit when investing in a foreign vehicle?
Lilypads will require a tax side letter from the foreign real estate vehicle ahead of the initial equity investment. The side letter will act as an affirmation for certain US tax treatment affecting the investment:
Lilypads also accepts equivalent documentation for relevant information that must be presented in the form of alternate sources in the investment documents.
Can I promote syndicate deals publicly?
Your Syndicated deals are not public by default. They must comply with 506(b) of Regulation D. Therefore, these deals may not be advertised publicly.
However, you may choose to market your Syndicated deals subject to section 506(c) which is also commonly referred to as General Solicitation. In such cases, you must notify Lilypads before launching your Syndicate so that Lilypads can adhere to every pertinent regulation.
This help page and the information contained herein is provided for informational and discussion purposes only and is not intended to be a recommendation for any investment or other advice of any kind, and shall not constitute or imply any offer to purchase, sell or hold any security or to enter into or engage in any type of transaction.
Investing in venture capital funds is inherently risky and illiquid. It involves a high degree of risk and is suitable only for sophisticated and qualified investors.