An LP is just a legal structure. Another is a trust or a corporation. More on LPs here:
http://myreinspace.com/public_forums/Real_Estate_Discussion/62-16690-84872-What_is_a_limited_partnership_or_LP_.html
Like flying a 747, juggling or playing Chopin on your piano raising money and syndicating an asset is "easy" ... after years of practice and many trials and errors and endless repetititons.
To be RRSP eligible you need 150+ investor i.e. a public company (not publicly traded) and/or be a subsidiary of a publicly traded firm.
An LP costs maybe $5-10,000 to set up, and if you wish to take in eligible, not just accredited investors, friends, family or close business associates (as per NI 45-106, also see below) you need an offering memorandum (OM) that costs another $20-30,000, plus perhaps an RRSP eligible bond structure or a mutual fund trust structure for another $20,000 or so. So budget $50,000 which is OK if you raise $2M+ but cost prohibitive if you raise less than $1M.
You also need to engage an EMD according to NI 31-103.
An LP is not RRSP eligible as it is essential "fractional real estate" and real estate is not eligible directly in an RRSP.
Related syndication / LP / money raising posts here:
http://myreinspace.com/forums/p/31039/147544.aspx?#147544
and here
http://myreinspace.com/public_forums/Real_Estate_Discussion/62-16913-Raising_Money_for_your_venture_-_The_legal_way.html
Feel free to email or contact me for more insight if you wish. I've been at it 10+ years and know all the pro's and con's.
If you use multiple people's money you are offering a security BUT there are a number of exemptions !!
Exemption means "exemption to issue a prospectus". A prospectus is an
outline of your securities terms and conditions that must be reviewed
and approved by the security commission.
Essentially there are
4 exemptions that are relevant to you or any person doing a JV on a larger scale, with REIN members or others:
1) you are doing JVs that involve friends, family or close business associates (see definition below) !
2) you are doing JVs with accredited investors. Accredited investors are
those that earn over $200,000/year (or $300,000 as a couple) or have
investable assets (alone or with a spouse) exceeding $1,000,000 . This
is besides their home, i.e. net investable also referred to as "financial assets" !! A rich butcher with a butcher house worth $5M, yet "only" $500,000 in his RRSP as such may not be an accredited investor.
3) They invest over $150,000 .. the so called "acquisition cost". People
investing over $150,000 are usually considered "smart" i.e. if they can
write a cheque for that amount the security commission assumes that
they know what they are doing.
4) You offer securities through an offering memorandum (OM) which is
similar a prospectus but has less financial depth and does not have to
approved by the security commission but just filed with them.
As long as you do 1-3 you are doing OK in Alberta without filing requirements to my knowledge.
Once you do option 4 (an OM) you must file with the ASC. Slightly
different rules apply in Ontario. Once you go to the US even more rules
apply. As such a lawyer is recommended, hence the high total fees. The OM exemption at the moment (spring 2015) is not available in Ontario, for example.
You may wish to have them sign a document (see rough content below) that they
are indeed a friend, family or close business associate to cover your
butt .. but you do not have to !
A definition of the relevant terms mentioned follows:
Accredited investor (as defined in NI 45-106) is :
(a) an individual who, either alone or with a spouse, beneficially owns,
directly or indirectly, financial assets having an aggregate realizable
value that before taxes, but net of any related liabilities, exceeds
$1,000,000; or
(b) an individual whose net income before taxes exceeded $200,000 in
each of the two most recent calendar years or whose net income before
taxes combined with that of a spouse exceeded $300,000 in each of the
two most recent calendar years and who, in either case, reasonably
expects to exceed that net income level in the current calendar year; or
.. there are quite a few more groups .. like institutions, banks ...
"financial assets" means:
(i) cash,
(ii) securities, or
(iii) a contract of insurance, a deposit or an evidence of a deposit
that is not a security for the purposes of securities legislation;
"spouse" means, an individual who,
(i) is married to another individual and is not living separate and
apart within the meaning of the Divorce Act (Canada), from the other
individual,
(ii) is living with another individual in a marriage-like relationship,
including a marriage-like relationship between individuals of the same
gender, or
(iii) in Alberta, is an individual referred to in paragraph (i) or (ii)
above, or is an adult interdependent partner within the meaning of the
Adult Interdependent Relationships Act (Alberta);
"person"
includes an individual, a corporation, a partnership, trust, fund and
an association, syndicate, organization or other organized group of
persons, whether incorporated or not, and an individual or other person
in that person's capacity as a trustee, executor, administrator or
personal or other legal representative;
Close personal friend/close business associate questionnaire
_________________________________________________
Name of director, executive officer, control person or founder
___________________
Length of relationship
_______________________________________________________________
_______________________________________________________________
Details of relationship or prior business dealings
The undersigned understands that the Partnership is relying on this
information in determining to sell securities to the undersigned in a
manner exempt from the registration and prospectus requirements of
applicable securities laws. and neither the Subscriber nor any affiliate
or associate of the Subscriber will pay any commission or finder's fee
to any director, officer, founder or control person of the Partnership
or an affiliate, nor to the best of the Subscriber's knowledge, is any
director, officer, founder or control person of the Partnership or an
affiliate entitled to a finder's fee or commission, in each case in
connection with the Subscriber's subscription for Units hereunder.
(Note: a person is not a close personal friend solely because the
individual is a relative or a member of the same organization,
association or religious group or because the individual is a client,
customer or former client or customer, nor is an individual a close
personal friend as a result of being a close personal friend of a close
personal friend of one of the listed individuals above, rather the
relationship must be direct. A close personal friend is one who knows
the director, executive officer, founder or control person well enough
and has known them for a sufficient period of time to be in a position
to assess their capabilities and trustworthiness. Further, a person is
not a "close business associate" if the person is a casual business
associate or a person introduced or solicited for purposes of purchasing
securities nor is the individual a close business associate solely
because the individual is a client, customer, former client or customer,
nor is the individual a close business associate if they are a close
business associate of a close business associate of one of the listed
individuals above, rather the relationship must be direct. A close
business associate is an individual who had sufficient prior dealings
with the director, executive officer, founder or control person to be in
a position to assess their capabilities and trustworthiness)
Dated: _______________________________.
__________________________________________________
Print name of Subscriber
By _______________________________________________
Signature
_______________________________________________
Print name of Signatory (if different from Subscriber)
_______________________________________________
who answered my posts yesterday).