Entity Structure for Unfunded Search Fund?

December 19, 2023

by a searcher in New York, NY, USA

I' m new to the search fund world and wondering how to structure the relevant entities.

If I'm doing an unfunded search, when I form an LLC, it seems like I personally would have all the interests, And then, when doing the acquisition, there would be a separate entity that owns the target, outside investors would have interests in that second entity, and I would own interests in the second entity through my original LLC. Is that right?

Also, would it be set up differently if I went the funded route?

Reply by a searcher
from New York University in New York, NY, USA

^redacted‌ had a great thread on structure (albeit more holdco focused) here: https://twitter.com/AZ_SMB/status/1638881980912918528

Reply by a searcher
from Texas Tech University in Austin, TX, USA

For your search & sourcing you can have a single member LLC set up with you as the sole member. You can set up a different entity that suits yours and your investors (if any) interests when you find a target to acquire. This entity can be a LLC or c-corp. Each of these types will have its own advantages and disadvantages that can be better analyzed once you know the target and the financing terms etc.

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