The Form of the Syndicate— Types of Business Organizations

Some syndicates are organized as corporations. Others as trusts, partnerships, joint ventures, tenancies in common, or limited partnerships. You may and must assume that the syndicator has chosen the form best suited for your syndicate. In any event, you will have no say on that matter. When you receive the brochure, it will tell you the type of business organization selected for the syndicate. You cannot change it.

We have no room for a discussion of the legal differences between the various business organizations. Probably you are not interested. But you should be interested in finding out whether you may be personally liable for the debts of the syndicate, whether you have any voice in the management of the syndicate, and whether the property can be sold and the syndicate liquidated without the consent of the investors.

Are You Liable for the Debts of the Syndicate?

When you make your investment in a syndicate, you participate in a business. Any business, even a well managed one, may fail. The question is whether there is any possibility that you, as a co-owner of the business may be called upon to pay its debts. The chances that such a situation will arise with a real estate syndicate are probably slim. But there are quite a few speculative ventures which bear almost no relationship to investment in real estate. Whether you plan investing in a conservative or speculative venture, you would probably like to be sure that your risk is limited to your investment and that under no circumstances can you be called upon to pay the debts of the syndicate. Some brochures contain this information in plain language.
The liability of a limited partner is limited to the
amount of Ms original capital contribution.

Any participant may be personally liable to a person outside the venture for the full amount of any obligation of the agent as a partner in Associates, or any liability of the partnership, which arises after the effective date of participation.

Nothing difficult about the two clauses. In the first case you are not personally liable for any debts. In the second case you are or may be liable for debts. Other brochures may and probably will tell you whether you will or will not be personally liable for the debts of the venture, but they use legal phrases which may not be quite clear to you. If your status concerning liability is not fully spelled out in the brochure, or if you are not sure that you understand it, don't hesitate to ask for legal advice. This is a highly technical matter and it cannot be discussed and explained here in all its details.

Next: . Management of the Syndicate's Property