b'How to Legally Raise Private Moneymembership for cash-paying investors and management. One class might be cash-paying equity investors, while another may be your company and its management team or others who provide services to the company in exchange for their interests. The investor class could be further broken down into subclasses, each with different returns or preference regarding payment of returns and return of capital. In this scenario, Class B, if re-served for the management class, usually takes a subordinate position to Class A interests. Class A might receive a preferred return (before Class B gets paid) during company operations or a priority return of capital on sale of the asset. Another option is to simply split profits amongst the classes. In a real estate transaction, it is important to have a discussion withyoursecuritiesattorneyortaxcounselbeforemakingdecisions about profit sharing, as doing it wrong could have negative tax implica-tions for service-providing classes. Example:A sponsor sells 60% of the ownership interests in its company to in-vestors in order to raise $1,000,0000. The offer is for individual Class A interests for $1,000 each with a minimum required purchase of 100, or an investment of $100,000. An investor who invests $100,000 purchases 10% of the Class A interests, but because Class A only owns 60% of the inter-ests in the company, this investor only owns 6% of the total ownership interests in the company (0.10 x 0.60 = 0.06; 0.06 x 100% = 6%). What does this mean with respect to this investors distributions? This investor will get 10% of any distributions made to Class A members. If your company makes a distribution to all members, this investor will get 6% of those distributions. What does this mean with respect to this investors voting rights? If there is a vote in which only Class A participates, and voting is by percent-age interests, this investors vote will be worth 10% of the voting interests. If there is a vote in which all classes get to vote, this investors vote will be worth 6% of the total vote. Your company will typically make distributions to cash-paying inves-tors pro rata or pari passu. Pro rata distributions mean they are allocated in accordance with percentage interests. Pari passu generally means in order of priority. As an example, certain classes may receive distributions first (pari passu), but the distributions will be further allocated amongst those class members according to their percentage interests in that class 86'