Resources / Should I Use a GP/LP or LLC Structure for My Real Estate Syndication?

The general rule of thumb is that if this is just your side hustle, or if you have a team of full time people, maybe less than five or ten employees, you’re generally probably going to look at an LLC structure. If your operations are much more sophisticated, you’ve got a whole staff of people who are helping you full time, then you might look at a GP/LP type structure.

Now, why is this? The LLC structure tends to give a lot more flexibility, whereas the GP/LP structure tends to give a lot less flexibility. Let’s say, for example, you and your business partner are flying off to Arizona, and something happens. If one or both of you are no longer able to act as active sponsors on the day-to-day of the project and ensure the success of the project, then there’s going to be an issue: who’s going to take over to ensure the success of the project?

The LLC structure doesn’t give your investors a lot of control, but it does grant them a little bit, so that they have the flexibility of choosing a new manager if the manager is no longer around or if the manager is unable to perform.

In contrast, with the GP/LP structure, if two people go on a plane and the plane crashes, presumably there are more principles and a whole staff of people who can still manage the day-to-day of the project, even without those two particular individuals. Investors are a lot more passive in a GP/LP structure, and they do not have that same type of flexibility to come up with some sort of contingency plan in case things go awry.