How it Works

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Steps to Launch your SPV

Leveraging the technology, we have simplified creating an SPV for our members. You can start with registering yourself at SPV HUB which is as straightforward as filling out your name and Email address followed by verification. The details submitted on our platform would be further used by our SPV Specialists to reach you and guide through the process. Once the agenda and prerequisites for SPV Development are clear, our SPV Specialist will get started with the compliance work.

SPV Development starts with setting up the entity followed by a series of Legal Compliance and administrative activities. Our SPV Specialists will take care of the complex tasks including acquiring EIN, contacting registered agent, opening a bank account, and document management. This is the step where the structure of your SPV is determined. At SPV Hub, a team of experienced professionals from Legal, Accounting, and Administrative backgrounds manage it to make your SPV smooth and flexible.

At this stage, your Special Purpose Vehicle is all set to receive and accumulate funds in one place. In order to get investors on board, they are invited. Interested investors sign the operating agreement and subscription agreement and wire the funds. Our Comprehensive Dashboard makes it feasible for Investors to join the capital raising fund with just a click of a button. Further, the process is supervised and a constant check is maintained on the commitments with real-time status and exemplary Fund administration services.

Behind the inception of every SPV, there is a special purpose. Once the required capital is at its place, the purchase agreement is signed and the funds are wired to purchase the asset fulfilling the objective of setting up the SPV. Based on the capital invested by each partner, the Cap Table is drafted along with the individual capital account statements. Also, requisite investment documents are shared with the investors to keep them updated about the deal. SPV Specialists at SPV Hub handle all the legal compliance and administration efficiently.

The aftermath of investment includes constant maintenance of the entity to avoid getting canceled and other post-close activities such as filing taxes, distributing financials for the SPV, wiring profits to investors in respective ratios, etc. Another essential element of our Fund administration services is Pro-rata rights where the early investors are entitled with a choice to invest more in the start-up in future financing rounds. Also, if a member is willing to transfer his membership rights in the future, the transfers need legal documentation and updating of the cap table.

Simplicity or Complexity in SPV Development comes from 5 core areas

LEGAL

TAX

ACCOUNTING

COMPLIANCE

ADMINISTRATION

SUPPORT

Step-by-step guide explaining complete lifecycle of SPVs

Complete Lifecycle of SPVs

We have simplified the complex SPV structure for you!

Explore the Complete Cycle of Capital-Raising Special Purpose Vehicles

A Step-by-Step Guide to SPV Creation, SPV Administration, and Closing Down an SPV

Step 1

Create an SPV

The process of SPV Creation begins with choosing the legal structure and registering the Special Purpose Vehicle with the state officials. Acquainted investors choose LLC or LP as it comes with the benefit of limited liability. The state of the US has its own set of rules and regulations for the creation of SPVs. Presently, Delaware LLC offers the utmost flexibility and tax efficiency.

Step 2

Appoint a Registered Agent

A Registered Agent acts as a representative of your SPV responsible to send and receive the legal documents on your behalf. While deciding the structure of the Legal Entity, the location of the entity is also decided. An SPV doesn’t require a physical office. Thus, it is advisable to register the entity in a tax-friendly state such as Delaware or Wyoming. Federal Law states that an LLC requires to nominate a registered agent resident of the selected state.

Step 3

Structuring through Documentation

Till the second step, your SPV entity is just base. It is the third step when SPV Development actually begins. The documentation determines what your SPV stands for. Three essential pieces of documents specifying the direction of your Capital raising SPV are –

Operating Agreement
Private Placement Memorandum (PPM)
Subscription Agreement

The set of the above-mentioned documents defines the behavior and actions. At SPV Hub, a professional legal team is appointed to draft the agreements meeting your requirements.

Step 4

Acquire EIN from IRS

Employer Identification Number (EIN) is another essential document for setting up SPV. It is generally required for two events – to open a bank account for the entity (which is our next step) and to file taxes. Every investment is made with the motive of revenue generation. Whenever your Special Purpose Vehicle makes money, the taxation step gets into the role and mandates EIN. Further, after filing taxes the K1 forms are delivered to the investors.

Step 5

Open Bank Account for SPV

Before proceeding with the asset purchase, all the funds must be placed at one point. This is where the bank account for your SPV is used. Opening a bank account for an SPV is not as uncomplicated as showing up at a branch with the basic documents. It should be considered, that not all banks hold the expertise of setting up and maintaining an account for a capital raising SPV. Once the documentation procedure for account opening is complete, your capital raising SPV is all set.

Step 6

Invite Investors Onboard

In order to get investors on board, they are invited. Interested investors sign the operating agreement and subscription agreement and wire the funds. Our Comprehensive Dashboard makes it feasible for Investors to join the capital raising fund with just a click of a button. Further, the process is supervised and a constant check is maintained on the commitments with real-time status and exemplary Fund administration services.

Step 7

Deploy Capital

Once all investors are on board fulfilling their commitments and signing the required documents, the next step is to deploy the accumulated capital. The purchase agreement is presented by the fund manager and the deal is negotiated. Once both parties come to an agreement, the fund manager transfers the accumulated fund to the start-up company making the investment. Further, the company receiving the investment transmits the equity in the name of the SPV completing the purchasing.

Step 8

Preparation of Capital Accounts

After deploying capital and gaining ownership of the asset, the next step is to prepare and distribute the respective capital account statements of all the investors. The statement describes the contribution of each investor, their stake in the investment made, and also the details of the deal.

It is an essential step where the onboard investors gain the requisite insight and receipts of their investment.

Step 9

Drafting Capitalization Table

A Capitalization Table also known as Ledger is a form of table containing details regarding every investor of the entity and their respective contribution and equity holdings. Drafting Ledger is a part of our SPV Administration Services and is essential to fulfil compliance mandates. The Capitalization Table is frequently used to -

Pay Federal and State Taxes
Record Keeping of respective proportions
Distribution of Wealth Generated

Step 10

Form D and Blue Sky Filings

The financial activity of pooling the funds and investing the same in an entrepreneurial venture has been recognized as a “Selling Securities” by the Securities and Exchange Commission (SEC). To transact securities legally, it is mandatory to notify the Federal and State Authorities which is done by filling out the respective forms. The Federal Government has assigned Form D – Consent to Service of Process. And the State Government has designated Blue-Sky Filings. In order to stay in the good books of the SEC, it is mandatory to follow the compliance which requires legal expertise.

Step 11

Generating K1 Forms

An Investment is made with the ultimate objective of generating wealth. When your SPV generates revenue, it is called a Taxable event. The IRS mandates filing tax returns on a Taxable event. To file returns, our SPV Specialists fill out form 1065 which generates individual K1 Forms for every participating investor. Further, the generated K1 forms are delivered to the respective investors.

Step 12

Prepare Financials

This step primarily depends on one event – when your SPV generates cash flow. Followed by filing tax returns and distributing K1 forms, the preparation of financial statements contain aggregating accounting information in form of standard financial statements. These statements are further distributed among onboard investors and partners. It is a crucial aspect of an SPV as it aids investors in determining and comprehending the financial health and performance of the entity.

Step 13

Annual Maintenance

It is mandatory to pay annual maintenance fees to State authorities to keep your SPV running. Not doing so can result in a hefty fine and shut-down of the entity. The compliance for annual maintenance varies depending on the chosen state of operations. Delaware LLC commands to pay annual fees but there is no mandatory annual report. Whereas, New York directs filing the annual report with the Secretary of State. By selecting our SPV Administration Services, you don't need to be distressed about annual maintenance as our SPV Specialists will take care of it.

Step 14

Pro-Rata Rights

To maintain the stake of early investors in a start-up, the investors are entitled to get preference in the follow-on fundraising rounds through Pro-Rata Rights. These rights are mentioned in the agreement clause signed with the start-up company. Such rights don’t mandate an investor to take part in future fund-raising rounds. Rather, it is optional to empower the early investors to maintain their percentage equity.

Participation in the fund-raising further impacts the Capitalization Table and the Taxes. Categorized under Post-Close Activity, experts at SPV Hub manage it fluently with efficient Fund administration services.

Step 15

Membership Transfer

Pro-Rata Rights and Membership Transfer are two optional steps and might not occur in lifecycle of a Special Purpose Vehicle. Being SPV Specialists in CA, we believe it is our sheer responsibility to introduce our members to the power they hold as investors. From the inception till the shut down of an SPV, the lives of investors proceed and there is a chance of an event where they need to transfer their investment from one entity to another. Membership Transfer results in ammendments in the Capitalization Table and filing Tax Returns. Categorized under Post-Close Activity, experts at SPV Hub manage it fluently with efficient Fund administration services.

Step 16

Distribution of Wealth

Once the SPV has served its purpose and generated the optimum wealth, the next step is to distribute the accumulated income among the investors as per their respective stakes. At this step, Capitalization Table is taken into consideration. The follow-on fundraising event under Pro-Rata Rights and Membership Transfer affect the Capitalization Table. So, at this step, investors acquire a clear picture of whether the administration and accounting of the Capitalization Table are maintained properly or not. SPV Specialists at SPV Hub make sure to distribute the correct amount to every investor.

Step 17

Shut Down

Once the SPV fulfills its purpose, our SPV Specialists start winding up the entity to avoid any mishandling and liability to the IRS. This step includes filling out the forms with the respective jurisdiction notifying them about the disestablishment of the entity. Overlooking this step can result in legal harassment. As the entity has suited its ultimate purpose, there is no need of bearing the maintenance cost and the same statement needs to be conveyed to official authorities. Our SPV Specialists generate the final K1 forms and deliver the same to the participating investors.