Kim Lisa TaylorSecurities Attorney, Founder, Syndication Attorneys, PLLC · Corporate Securities Attorney, 2x Best-Selling Author, Nationwide Speaker | Private Placement

Class B Interests: Protect Your Profits and Assets 💼 #RealEstateTips

15 Dec 2024 · 1 min

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In this segment, the speaker explains that investors should receive compensation for their Class B interests, which represent the profit‑sharing portion of a real‑estate venture. The profit split between Class A (management) and Class B (investor) typically favors Class B, allowing investors to earn the majority of the upside. To safeguard these earnings, the speaker advises placing the Class B interest in a separate holding entity—such as an LLC, family trust, or other asset‑protection vehicle—so that any legal claims from investors target the management entity (Class A) rather than the profit‑sharing entity. This structure isolates liability while preserving the investor’s profit share.

Chapters

So we're going to have you actually pay something for those Class B interests in addition to all the sweat equity you contributed to sit on these meetings, to go to these events, to meet and develop relationships with investors. Then your Class B interests are where you earn your profit share. So your profit share, the split between Class A and Class B, is where you earn the bulk of your money. And so you'll want to separate LLC, a holdings entity that takes title to your Class B interest. This could be your family trust, it could be an asset protection entity. Your liability lies within the management entity because if you are to get sued, it's going to be the management entity that gets sued by investors.