There are five key documents as part of any syndication or fund. And we're going to go through what those five documents are, what how they work, and why you need them and how they fit into the whole system. My name is Tilden Moschetti. I am a syndication attorney with the Moschetti Syndication Law Group. A lot of times when I have people who are brand new who have never done a syndication or fund before, they are confused as to what the
documents are that go into what we're all putting together. How do we build that security, when we're looking at it from a document kind of point of view, there are five key documents that take place before the form d and notification to the, to the states in order to build that structure of what that
security looks like. So we're gonna go through those, the very first one is the articles of formation or sometimes called the Certificate of Formation. This is typically filed with the secretary of state for the state where that entity is being formed, you can think of it as the birth certificate of the entity. So for an LLC, it's always the articles of formation, Certificate of Formation, something like that, if it's a corporation, and oftentimes, it's called the
Articles of Incorporation, almost all of them are LLC. And so we'll just use the LLC link go here, it'll be simpler. So the articles of formation or Certificate of Formation filed with the SEC or MA filed with the secretary of state, it does have several different things. First, it lets the state know, hey, we're forming this entity. So it has a filing fee attached to it basically sets that up, it gives them the contact
information for it as well. So hey, if you need to get a hold of me state, this is where I am. And this is how we're who's in charge. It'll oftentimes have what kind of business it can be that most of the time, we can get away with just saying any legal purpose. So if we can do that, we do it just because it's nice and vague. And in what you're setting up is for a legal purpose anyway. And it's nice and flexible for you. So a lot
of times that will be a part of it as well. Another piece of it that's also very important is who is the registered agent or the agent for service of process. What that means is that if somebody needs to file a notice or serve notice upon somebody, say they're starting a lawsuit, they need to be able to have, who that person is how to actually give it well, the articles of formation or Certificate of Formation is
visible and is available for view by the public. So they can look at that entity, look at who that registered agent is or the agent for service of process, and know who it is either as an individual or an entity, so that they can give formal notice to them. So that is number one, that is the Certificate of Formation or articles of formation. Number two is the operating agreement. So the operating agreement you can
think of as the rules for the road. So it is the the rules that the opera that the entity that you formed with that Certificate of Formation, that birth certificate, it's the rules that it must comply with. So that's the operating agreement. Now the operating agreement is always extensive
and informed, and basically and legalese. Because there's a lot of things we're trying to do. We're trying to make sure that it's very clear what happens if so the operating agreement should be a document that if there is ever a question about what to do when blank, that blank gets through, you know, once you identify that blank, you can go to the operating agreement and find the actual answer about what is supposed to
happen. We try to make that as complete as possible, but as flexible as possible to so that way, whatever is in that blank, there is an answer that is provided for in the operating agreement. For a typical syndication or fun, these can be 50 to 70 pages long. So it's very extensive and it covers a lot of stuff. So everything from who can be a member or what happens if a member wants to go out or allocations for taxes or
who they are. It's the who's the manager and how can the manager be paid to distributions and compensation all of those things or if there's problems, what do we do? That's the opera The agreement the rules for the road of the entity. The third document is the subscription agreement. So the subscription agreement is the document that an investor signs that says, hey, I want to be part of this investment. It's that investor saying, I'm gonna give you this amount of money, and you're
gonna give me this amount of interest in that LLC. And that I want to be a part of, in exchange for all that I, as an investor, get to be a member of that, of that company. So when they, there are other things that take place as part of that. So there's this identification of an exchange of money for
units in the LLC. But also we have some warranties that are being made that that the company that the offering of the security itself was compliant with the rules to make sure that's everything, everybody is clear about what happened, that the investor was given a private placement memorandum, which we'll talk about in just a minute, things like that, that all goes into a subscription agreement. The fourth document
is the investor questionnaire. Now, the investor questionnaire actually technically isn't required required in quotes, but it is a darn good idea. So the investor questionnaire serves two purposes. First, especially under Rule 506 B, what do you have a non accredited investor, the non accredited investor must be sophisticated. So this questionnaire helps us with that
sophistication part. There is a survey, there's a couple questions that establishes that the investor is saying that they're a a sophisticated investor, that they know what they're doing when they make this investment, that helps the syndicator or the fund manager, because if there's ever a problem, they can always present that document that's that basically outlines all a good faith basis for establishing
that the investor is indeed a sophisticated investor. The second rule that the investor questionnaire for is for is for compliance and ease of use. So what it does is it lets us, you know, pay our taxes, lets us file are make distributions, because it has the investor, it lists your investors name, you know, if they're doing it under an entity, it's got social security numbers, it's got information for the Know Your Customer laws, like driver's license number, things like
that. So that way, when it comes tax time or distribution time, you've got one easy place to look where the document lives. Now, the fifth one is the private placement memorandum. Now you can think of this as the biggie the big kahuna and the big dog. This is the document that basically sets up all the reasons that this is a legitimate investment for somebody to invest it. Now, it's not the legal paperwork in terms
of the operating agreement or the actual rules. But what it is, is it's the required disclosures and declarations being made by the sponsor of the security to the investor. So part of it is the terms of the offer. So the terms of the offer is how distributions happen, what's the membership price, what are we investing into all those things that take place in it. It also is doing other things that are very important as well. So it's making mandatory disclosures, disclosures, like a
investor, you know that these are risky, right? You know, that you could lose all your money, it's a fact you need to know it. And it will also go through more specific instances of what other risks are inherent in the investment. Because no matter what, there are always inherent risks in any investment. This, the other part of it is, is it makes a disclosure of any
conflicts of interest. Because there are also always inherent conflicts of interest, because you've got a sponsor, who is making money off of basically having an investor take care come into the investment, and so that they can pay distributions to that. So they're making money off of that, but they're also acting as a fiduciary at the same time. So based on that there's always a conflict of interest. Now conflict of interest are okay, but they need to be disclosed and disclosed
and disclosed. So it's very apparent what those conflicts of interest are. So that way nobody ever can say, hey, you never told me that you were getting paid a commission or you never told me that you You're investing in this property yourself, or whatever it is, those different conflicts of interest. We're trying to make sure that all the risks, all the conflicts, everything gets told to the investor. So ultimately, they can make a determination whether this investment is
suitable for their own purposes. They're the ones at the end of the day, making that determination, and to make a determination for suitability for their own purposes. They need all of the information. And that is the point of the private placement memorandum. Wow, that's the five big documents all that take place before the forum D ID state notices. As you can see, there's a lot of inner workings that are going on. So my name is Tilden Moschetti. I am a syndication attorney with
the Moschetti Syndication Law Grop. We help people put together these documents, we put them together for syndicators and fund managers, because it's part of the compliance it's part of how you structure it. On top of all these documents, we also help our syndicators and fund managers really do whatever is needed in order to help them be successful in their security offering. Sometimes that's going through materials like marketing materials and helping them identify what what sort of
disclaimers need to be there. Whatever we can do to help make our syndicators and fund managers successful is in everybody's best interest. That's what we all want at the end of the day. And that's why that's why syndicators and fund
managers hire us, we're great at that. We can help them make decisions that are sound rational, compliant with the rules, but also based on the best practices have somebody who's actually done a lot of deals for themselves, which is me, and somebody who's also overseen and given a lot of interaction and advice about the inner workings of the offerings that my clients are making more than just putting together the legal documents. If we can help you do the same thing. We'd love
to talk with you. Give me a call, send me a message and let's do that.