What is the best Opportunity Fund investment vehicle to choose? Why?
It really depends on the type of investment, the types of investors and what the goals and purposes of the Opportunity Zone fund and business. Very important to discuss and understand these points, as these points will then dictate the best structure.
There is no best fund. I can give you some guidelines. First, the fund should be from a manager that has experience in development deals. Second, a fund that is not a blind pool, but has identified projects will allow you to evaluate the project inside the fund. Third, to reduce risk, try to use multiple funds if you have a large enough gain. Because minimums are $50,000 to $150,000 in most funds doing more than one may not be an option. Fourth, while I have not seen a fund emphasizing technology startups, such a fund may provide the largest gains. Such a fund also has the greatest risk. Expect such a fund to be at least 18 to 36 months out before being offered. My last guidance is that any investment must be suitable for your investment needs, goals and risk tolerance.
It depends on the type and scope of the investment thesis. DE, LLC with project-specific LLCs as stand-alone subsidiaries is my first suggestion to clients.
This is asking what is the best investment for me. There is no way to accurately answer this question. Like any investment, you need to do your due diligence on the property and the sponsor before making a decision.
Choosing the best legal format for your QOF is dependent upon what your investments will be. In most cases we would recommend that the QOF be structured as an LLC taxed as a partnership. QOZ businesses and real estate investments under the QOF should also generally be LLC/partnerships to allow debt to be counted toward investor basis and to allow early year losses to flow through to the QOF owners. In certain cases, investors may not want the flow-through and a C corp may be more appropriate at the fund or operating entity level. I have yet to see a situation where I would advise using an S corp.
DISCLAIMER:the information found on this website is intended to be general information; it is not legal or financial advice. Specific legal or financial advice can only be given by a licensed professional with full knowledge of all the facts and circumstances of your particular situation. You should seek consultation with legal and financial experts prior to participating in any aspect relating to Opportunity Zones. Posting a question on this website does not create an attorney-client relationship. All questions you post will be available to the public; do not include confidential information in your question.