Best Structure for Investing in Independent Sponsor Deals?

February 15, 2025
by an investor from University of Oxford in Hamburg, Germany
I’m a foreign investor and I’ve set up a foreign entity that owns a U.S. C Corp as a blocker corporation for my investments. Now, I’m considering the best way to structure future investments in independent sponsor deals and weighing two options:
1. Direct Investment via the C Corp – The C Corp would invest directly in deals. This keeps things simple and reduces administrative costs, but it may limit my flexibility. If I ever need liquidity or want to exit a deal, I might be restricted by transfer restrictions requiring consent from other investors or the sponsor.
2. Setting Up an LLC Below the C Corp for Each Deal – The C Corp would own a separate LLC for each investment. While this adds administrative effort and cost, it could provide more flexibility. If I wanted to exit, I could potentially sell the LLC along with my interest in the deal rather than needing approval to transfer my stake.
Given that my typical investment range is $10K–$25K, with occasional $50K investments, I’m trying to balance flexibility with efficiency.
For those with experience in structuring investments:
- What are the key considerations when choosing between these two structures?
- How do you weigh administrative costs vs. exit flexibility
- Have you encountered challenges with selling interests in direct investments?
Would appreciate any insights—thanks in advance!
from Capella University in Lakewood Ranch, FL, USA
from Queen's University in Toronto, ON, Canada