b'7. Choose Your Corporate StructureIn any case, the investor entity will be managed by a manager or a gen-eral partner that is usually its own legal entity, with members or limited partners as the passive investors. For purposes of this chapter we will use terminology consistent with an LLC (manager and members), as this is the structure most commonly used in real estate syndications.The investor entity will need an agreement between management and investors that will govern how the company will operate. The company agreement will define management and investor rights and duties, and how cash will be distributed to each of the participants.Manager-Managed SyndicatesFor the management level, you would typically use a separate LLC that includes the management team as its members. If an individual is named as the manager, the syndication company (where investor funds are pooled) can be harmed if something happens to that person, as it will no longer have a manager until the members can elect a replacement. If the manager is a multi-member LLC, the LLC will continue to exist as long as it has members and the investor entity will be unaffected if something happens to one of the members. The manager LLC will earn fees for its active role in management, which will be taxed at ordinary income tax rates. Member Classes The investor entity in a syndicate will typically have multiple classes of members. Well call them Class A for cash-paying investors and Class B for the management or sweat-equity class. If Class A members will have different returns, they may be divided into separate sub-classes (A-1, A-2, and so on).Class ACash Paying investorsInvestors who purchase Class A interests in the investor entity will be-come Class A members. ClassAmemberswillcontribute100%ofthecapitalcontributions necessary to capitalize the investor entity in exchange for a portion of its ownership interests. The manager LLC or its members will retain the rest of the interests as compensation for their past contributions to the investor entity. 79'