Documenting the LLC investment program
The forming and funding of an LLC requires four documents:
- two to form the LLC itself; and
- two to solicit investors to fund the LLC.
The two documents needed to form an LLC include:
- the Articles of Organization (LLC-1) form, issued by the California Secretary of State (SOS) for use by the broker acting alone to establish and operate an LLC in California; and
- the operating agreement, similar to most co-ownership agreements in its management, income- and profit-sharing, voting and buyout provisions. [See RPI Form 372]
The two funding documents include:
- the investment circular (IC), a narrative disclosing all the material aspects of the investment to prospective co-owner members, prepared as the product of the broker’s due diligence investigation and analysis of property data [See RPI Form 371]; and
- the subscription agreement, the investor’s agreement with the broker to contribute funds in exchange for an ownership share in the LLC. [See RPI Form 373]
The operating agreement is signed by all investors at the same time they sign the subscription agreement agreeing to invest and acknowledging their membership in the LLC. [See RPI Form 373]
A broker uses the Subscription and Agreement to Invest form published by RPI when soliciting and subscribing a cash investor for funding an LLC, to confirm their approval of the investment circular, acceptance of the LLC operating agreement, acknowledgement of their membership and the broker’s receipt of their contribution. [See RPI Form 373]
The Subscription and Agreement to Invest documents the:
