Boost Your Consulting Business with Legitimate Online Signatures in the United States

How to eSign a document: online signature legitimacy for Consulting Agreement in United States

welcome to the real estate syndication show whether you are a seasoned investor or building a new real estate business this is the show for you Whitney Sewell talks to top experts in the business our goal is to help you master real estate syndication and now your host Whitney Sewell this is your daily a real estate syndication show I'm your host Whitney soil today our guest is mercy arrow thanks for being on the show again Mauricio thanks for having me back Whitney appreciate it yeah I'm always honored to have you on the show and somebody your level of expertise and experience to share with the listeners and I it's a it's an honor and it's throw the listeners I'm sure you've heard of him before you've probably seen him on social media and I hope you have or connected in some way but you probably heard he won't show Jeb yes 195 you should go back there and learn more about him and in his background but just a little bit about him he's a founder and CEO of premier Law Group and internationally recognized securities firm that spends a hundred percent of their practice on syndication for real estate investors regularly travels around the country speaking to real estate investors and entrepreneurs educating them about how the syndication legal piece fits into the overall syndication puzzle you shared the stage with the likes of Robert Kiyosaki Ken McElroy Peter Schiff Brad some rock and of course the real estate guys Mauricio thank you again you know give the listeners a little update maybe about what your focus is now if anything's changed or you know what's going on and then you know let's dive right into this topic that everybody is just dying to know about yeah I'm still plugging along doing the same things that I've been doing now full-time or exclusively for the past I don't know seven eight nine years which is just syndication 100% of my practice is representing real estate investors who are raising capital to go do bigger and better deals and I just make sure that they stay out of jail and avoid being cellmates with Bernie Madoff as I like the joke and talking a little bit these days about opportunity zones but again always in that context a lot of my clients reached out to me and are interested in that topic and so it's part of it syndication process but I live in the syndication world specifically all the exemptions and maybe if you'd like I can kind of do the quick over you so that people kind of understand what we talked about in that episode was it 195 it was 195 yeah that'd be great that'd be great yeah and I'll do that just cuz I think today's topic you'll see how it fits into that overall structure today we're gonna be talking about with you about the do's and don'ts of helping others to raise money and if you recall from that episode you know syndicators are obviously or maybe not obviously but they're they're selling securities which is why the SEC is involved well all the people say hey y-you know what I'm buying a piece of property why is it securities law is involved and the reason is anytime you're taking money from investors where there's an expectation of a return and you're the one that's generating the profits in other words your investors are passive and you're active you're dealing with the security and therefore need to comply with securities laws and I guess in that episode there's really only three things we think about or consider when we are selling securities and that is number one we must register that security with the SEC number two we must find an exemption to that registration or number three it's illegal we kind of joke about the illegal part but let's go from the top number one registration we rarely if ever want to do a full-blown registration because it just takes a ton of time and a ton of money think you know one to two and a half years to get that process through the SEC and if you're in contracted buy a building you know who has a year or two to wait from the SEC to approve your deal it's just not realistic and it's gonna cost you six and I've had clients where it's cost them seven figures it's just not a realistic option exemptions we're really we we spend most of our time and so fortunately for us we talked in that episode about the most common exemptions and that's where you hear 506 B 506 C or reg A+ all those types of exemptions are so that we don't have to register with the SEC and then the third one is illegal which is kind of you know half a joke obviously but obviously if you're not complying with securities laws and you're not registering you're not fine an exemption then you are conducting an illegal offering but the topic today which is helping other and other syndicators raise money in exchange for compensation that's gonna fall under breaking one of these exemption rules and basically becoming an illegal offering so I think it is a very important topic and I think I think along with the we're just talking about it off camera along with the social media rules everybody's breaking these days I think paying others illegally for raising money is another probably one of the biggest mistakes people are making out there so I'm glad we're talking about it today awesome now I appreciate your lab rating on on what we covered in the last show and I highly encourage people to go back and listen to that and then come back to this one but it is so common and I mean I hear it every conference I go to a lot of people I know in the industry all over social media you know about raising capital partnering with other people and and we want to know that we're doing it legally and you know how how to do it because it's a great way for people to get started in the industry but we want to make sure we're not you know getting started to find a jump suit you know so we want to make sure we're you know that we're doing it legally and that you know we're presenting ourselves and the entire team as professional as possible and and so you're gonna help us understand that better today I know and so you know get us started in in knowing that we're doing it legally and people want to raise capital people want to get started you know well you talked it'll so many people maybe some common mistakes and yeah the first thing the first thing you have to recognize is that any time you're receiving compensation for helping others to raise money you're most likely acting as a broker-dealer and so the rule is you cannot pay anybody a commission or transaction based compensation unless that person is SEC licensed broker dealer that's the rule that's just like you can't practice medicine without a medical license you in theory can't practice law that some people are out there doing it without a license you can't be giving advice or receiving compensation for for referring people unless you're a broker dealer so the most common ways let me just start with like the common ways I see people doing it that I think is an absolute no-no and then we can maybe you know maybe then we'll talk about the proper ways to do it so you're doing it legally the first one is people just do it people are out there just flat-out you know making introductions making recommendations referring people to other people referring people to sponsors and the sponsors are cutting him a check whether that's officially in writing or it's a handshake or what-have-you that's being done and like I said the problem on the receiving end whoever is receiving the conversations they're practicing without a license like we just talked about and look probably for the syndicator is that they're obviously not disclosing that because it's an illegal payments o people don't disclose it so now you're doing the illegal offering because you're not giving them the full set of disclosures because obviously when you're paying a referral fee that's that can't have a material effect on somebody investing like am i are you referring it to me because you're getting the compensation are you referring to me because you really do think it's a good deal so that's the number one kind of obvious mistake I just see people doing it and don't even think about the need to to just need to think about it that where they do you need to be licensed or what are the exemptions or whatever so that's number one so just so just referring someone so you know I just met somebody whatever downtown or whatever and and they're we're talking about investing in real estate but what's that you know I was an ass indicator you know and I just said hey you know you should go meet my buddy that's you know closing on this apartment complex that would that's illegal is that that would be fine as long as you're not getting compensated right so I mean pearl is free by just to kind of bacterial referrals are a great way to meet new people and there's a great way to have that's kind of one of the ways you can actually not have a pre-existing relationship but pre-existed substitute relationship and still not be afoul of the marketing rules because you didn't market or advertise that person it was referred to you by a current investor or maybe another whoever that's a referral that's fine it's the getting compensated part that is the problem and I don't get too much into the finder's world because because that's a lot of people trying to get around it that way too maybe that should be our number two point but finding is very difficult because finders is literally you know maybe the way you said it you have to repeat it after listen to it of how it goes again maybe that's okay because you literally were making the introduction and so if you're you know the traditional nice way of doing the finders is like it's like Whitney hey if you have you know if you have a list of ten people that you can give to me and I'm gonna pay you ten thousand dollars without list of ten people and then I reach out to those people you can kind of its kind of like a finder's you haven't made any representation you ever make any any recommendations to that effect but but let's look I just don't trust if anyone I don't trust anyone to be able to just say hey here's Whitney's telephone number he has a deal you should call him there's always gonna be hey he's got a great deal right there's a little right he's got a great deal oh you really should selling you some additional stuff in there and certainly if they're part of the conversation so to me being the finder distinction is very dangerous and also nothing to consider is the finders their stuff at the state level but remember this is all federal and I appreciate you saying - about like the referring was okay because long as you're not compensated it's because you're not advertising it I think that person didn't come to you because of your advertisement it's they were right that's one of the way a lot of people think a lot of people think that the only way to get around using the word get around cuz it sounds like it's nefarious but the only way that you're not going to be considered advertising or or soliciting is if you have some pre-existing substitute relationship and that's not true 80 90 95 percent of the time that's the easiest way to do it but there are other ways to not because it advertising and referrals is a great one but you can't get compensated for that because many you are getting compensated now you're you know sort of acting as a unlicensed broker the next one that's by far probably next realistically common one is everybody likes to put these side agreements together right oh we'll call it a marketing agreement we'll call it a consulting agreement oh we'll call it an independent contract repayment something like that and there's two issues with that the first one is whatever you call that arrangement it doesn't matter right the SEC is going to look straight through that document and they're gonna actually look at the underlying facts and they're gonna see what exactly did you do so if you are claiming hey I'm paying this guy a marketing fee then it's gonna be your burden again if you get caught or you're in the situation where you're sitting across a regulator it's gonna be your burden to prove all of these marketing things you did right and so if you're claiming you're doing ABCDE your burden is to prove it same with the consulting agreement which is difficult to do I would tell people you're you know probably phone records or you know if your consultant you're obviously being some you know you do some consulting work you just need to read they're meeting this person in person or you're on the phone you're gonna have to provide records you have to provide notes of your meetings you know minutes of meetings it's gonna be you'll burn to show that you actually did that work and that the compensation was commensurate with that work if you're suddenly getting a chameleon dollars cheques or whatever for for doing a little consulting work that might not make sense so that's you just got to be really really careful by an another thought and just I just lost my train of thought there but on the talking agreement it doesn't really matter what you call it and the burden is gonna be on you to show that Whitney I'd another great thing to say about that but it just this game it'll it'll probably come back to me so that's another way that you want to avoid doing I know you said there was two issues and whatever you call it doesn't matter this CC will see right through this you're gonna be your burden to prove it yep great stuff and then there's something else I was gonna say and then come back to me the third way that people like to do this and I actually it can be done and I used to endorse this a bit and then I'm kind of backing off a little bit and that is the fund of funds right which actually can't be legal so that's why it's none of this is good a good hybrid one so you in theory could raise money into your own fund and your own syndication like you raise a million dollars into your syndication then you turn around and invest that million dollars into somebody else's year or right and you get compensated at your level right you take an acquisition fee management feed you know you split 80/20 however you want to do it and you can probably negotiate with the company that you're investing in maybe a little bit of preferential treatment because you're coming in with a huge a million dollar investment maybe you're getting a little bit better preferred return or a little bit better you know whatever so that way you can take that compensation that extra amount of money and pay yourself the challenge is that when you do that you've got to remember that you're no longer investing you're no longer raising money and investing in real estate right and even investing in an LLC that owns real estate that essentially is a pass-through it's essentially a right investing in real estate you are now investing in a security right you're investing in somebody else it's not stock at somebody else's membership LLC but you're essentially now investing in somebody else's security it's like you're buying Apple stock or Microsoft stock or what have you so now you're kind of giving advice on security that's opposed to real estate and so the question that always pops up in my mind is do you now need to be a registered investment advisor in order to do that not a full-blown Broker Dealer but you need to be a registered investment advisor and the challenge I've always had is that that is a state-by-state issue it's not a federal issue issue the only time it really becomes an issue at the federal level if you're down on over a hundred million dollars in assets and the management but below that it's a state issue so what state are you live it depends on that and so some states require you to register as a registered investment advisor which isn't the end of the world but it does require you to get you know take an exam and pass you know what I forget when it's the series seven or series 56 sixty seven of one of those series exams and then there's some compliance issues that you've got to stick stick to so it unless you're doing that for a living or you're going to do a lot of it not the greatest thing but there are other states like California actually in terms of Brighton to me that hasn't exemptions to that so you don't have to register as a registered investment advisor but you do have some compliance including the dreaded audited financials so there might be a cost involved I don't think the actual work is a big deal you can outsource that but there's a cost involved so you can't do the fund of funds but again you've got it's not something again it's not do it yourself don't go and just go do it because all these issues that you probably haven't even thought about come into play and when you're doing the fund of funds even though it's a legal way to do it there are some strings attached to that there's any other ways that you've seen people that you think is illegal and I'm happy to comment on them but those are really the three or four ways that I see most people doing it in terms of trying to raise money for others that's that's really illegal yeah you know I'm gonna hear well you know they're putting me on the GPS ID or you know I'm doing a consulting agreement but you know I'm also on the GP side why is that not okay and that triggered my memory Whitney so thank you thank you for that so what I was going to say is that if you are sinning and again this is metaphorical because you're typically not sitting across the table from a from a regulator it's usually you know it's done through through correspondence but let's say you're sitting across the regulator and the regular is saying hey look I see that Whitney is a 5% or 10% GP in your deal right what did Whitney do to earn that fiver at 10% your answer could not be he helped me raise money it has to be something else and that's why when we're talking about when you when you're coming in as a GP watch I'm kind of jumping outside when you're coming with GP you actually have to be doing real work you can't be just getting the percentage of the deal in order to get a percentage of GP so I actually this jump ahead of myself a little bit so what are the ways that you can legally do it right and there's really in my mind two or two-and-a-half we already talked a little bit about the fund of funds which you can do but you've just got to check with your state regulators or state you know state securities attorneys which I can help you do that as well but to make sure that you're doing that and compliant whether you're registering is a registered investment advisor or just whatever compliance that state requires the next way would be obviously to become a broker dealer right which you know that's I just wanna throw that out there that's obviously not realistic it the last time I looked at it many many years ago for corrected for the realistic guy is Robert Ross you know it was a six-month process it was really expensive a bunch of exams a bunch of compliance it's actually cheaper to buy one it's actually cheaper to go you know I think for 500 grand or something like that you can go buy a broker-dealer firm and that's probably the easier and quicker and easiest way to do it but there's still a ton of compliance so it's probably not realistic but I wanted to throw it out there so the main way to do it in a sense it's a long-winded answer to get to the point where every wants to find out how you do it the main way to do it and I alluded to it a little bit before is to bring them in as a legitimate co-sponsor and when I say legitimate I mean not hey come in like you mentioned come in and go help us raise money and we'll give you a 5 percent or 10 percent or or god forbid the worst one which is depending on how much money you raise we'll give you a percentage of the deal because that's now clearly transaction based compensation which is the hallmark of being an advisor or broker dealer so but they have to be legitimate which means number one they've got all the liability now right their co-sponsors if the deal goes south they've got fiduciary responsibilities they're gonna go south with them and be their part of the deal and again they've got to do real work whether it's helping with the underwriting or the talking to the lawyers and the CPA age or the Investor Relations or putting the you know the business plan together or do deal or whatever all that stuff that everybody else is doing they have to do that as well because and that's where I was going to my point if it ever gets to that point where somebody's challenging you and saying you know again Whitney you you earn 10% here you don't see didn't put any cash in this deal what did you do you cannot say he helped me raise money you've got to list all of the other items and they have to make sense again like if you're just doing you know investor relations where you're spending a couple hours a quarter and you're getting 25-30 percent of the deal all that it just doesn't it's a hard sell right so it's got to be commensurate with the amount of work you're actually doing doesn't have to be equal but it has to be somewhat commensurate with the amount of work you're doing so that's really the main way that I now these days recommend doing it again the fund of funds is something you may want to look into but anything else else I would stay far away from that they saw I was too far away from finder trying to argue or finder and the marketing agreements I mean there's a couple of clients as I've had that legitimately do marketing like that's what they're getting come and it's a flat fee and it's like hey you pay me 15 grand and I'll put together the business plan I'll put together the the the one-page you know the one page the one sheet that we call will take over your social media marketing because you know it's five or six see so well market and social media will well you know in blasted out to our group of people I mean there's legitimate ways you're not actually getting it doesn't matter whether they're raising money or not and that's one of the questions you need to ask yourself is when you pay someone are you willing to pay someone $10,000 or $20,000 or give somebody ten percent interest in the GP whether they raise $1 or raise a hundred million dollars or raise 0 dollars yeah I can see where that you know as an experienced indicator and you're bringing on a partner who can have the benefit as well as raising capital but obviously they're gonna be doing other things you know they're I mean you're gonna look at their track record a lot better than - right you're gonna you know hopefully they can bring a lot of value in raising the capital but you can't you know you're gonna say well this is what you're gonna be paid and you know obviously you better bring some cash you know bring more value by raising capital but whether they do or don't this is what they're getting paid here's the other risk you have and this has happened to a couple of clients now that I'm working with that obviously weren't doing it while I was working on their particular syndication but because you can't put it in writing right you can't you know you can't put a contract together and say hey if you for every hundred thousand dollars you bring in I'm gonna give you one percent or whatever it's really just a handshake agreement so what happens when the relationship goes south which it has happened in this case where you're not quite done with the entire phrase but something's happened there's a there's a fall out of the partners they want to get rid of but the partners saying no I'm supposed to be 20% or 30% of the company and they're like yeah but you were supposed to raise the money and you didn't raise any money and so now there's a huge dispute you know what do you do so you just have to be really careful very careful that's why we have somebody like you and our on our team right yeah now so so just be careful about that and again this is the whole syndication on the legal side is obviously not a do-it-yourself project anyway so whoever your legal adviser is that's again one of my pet peeves everybody thinks a lot of times the syndication attorneys and just people have put together documents oh I need somebody to put the PPM together put this together and that's just such a fraction of what we do we're there as advisors and at least in my case I'm underwriting and I'm really we talked about the last time I'm looking at your deal your business planning pulling out all the information and that's one of the things I'm pulling out is about you are you paying a commission to a legitimate broker dealer no are you paying commissions remember when you can't do this oh wait I wanted to do this no you can't do that so that's all part of that communication that you have to have on the front end with your securities attorneys so that you you don't fall afoul of these these rules because again it's not just about putting dock together it's about finding out all the risks and your deals so number one you can figure out what to put in the dogs and number two you can advise a client whether they're doing something right or wrong including you know including the social media stuff I've actually now started doing social media reviews for my clients I do I do website reviews too because that's another issue with people is that they they have websites out there and they're doing 506 sees that are in violation and I do the same thing with social media I can't keep up with social media on a daily basis oh I kind of do a snapshot review but I just it's become such a big issue that you know I kind of take a more proactive approach because a lot of times they won't tell me what's going on and what they're doing on social media on the website that's a great service right there that I hadn't even thought of like I mean from from your standpoint just you looking at my website are you looking at my social media and giving me some feedback hey you know you should take this down or you know or no this is okay or you know I did have somebody go to my website an attorney you know and he clicked on or knows my it was my signature in my email and it said because it says something about invest with us you know something like that and and at that time I'd never even thought about it you know until he brought it and he said I clicked on it and it took me and I'd love to have your but but it just took took him to a scheduling app you know to schedule a call with me it doesn't show him like offerings that doesn't show him deals it doesn't show him anything but like schedule call you know and so he didn't think that that was massive you know or anything problem or a problem with that but but anyway yeah so so what I do is actually I do a record which is actually been pretty popular I do a video recording of your website so I look at your website and then I do I like depending on how how terrible it is or how good it is it may be a two three four maybe five minute video and I just go through your whole thing and I point out different things on the thing on the page and different tabs and in same thing with a social media review but it's okay for you to put information about your company it's okay for you to to invite people to call you to find out more about your information and if you saw one of my videos which I posted on Facebook on social media I thought you one of my more popular ones there's a process that you can take once you want to accept or once you capture people through your website there's a process you can take them through to take them from a complete stranger all the way through to having a pre-existing substance of relationship so that you can then offer them a future deal there's a specific process for the specific guidelines that the SEC gives us so that's just step one so just because you captured that person's information like you just mentioned and you have a call with them that's great you can't put them in your deal unless it's a 500 succeed but if you're doing a 5 or 6 B that prohibits advertising or generally soliciting that's going to be considered advertising if you then put them on the deal but if you walk them through these six steps that you must take in order to get to know them really well and be an established that substance in relationship then you can put them on the next deal not the current view but the next deal and not run afoul of the marketing rules and I'm actually you know just I think we talked about offline I mean this been such a huge topic but I'm actually finalizing my 7 part video series on social media the do's and don'ts because I see so many people you know messing that one up and there's so many people on social media doing things that they actually should not be doing that it's such a such a huge thing I just decided to do a little video series on it so if anyone's interested I'm a petition I can't wait to see that and hopefully we'll do another show about social media and we'll be able to tell people where to find that I'd love to do that as well but you know as far as like you know paying paying people race capital I know maybe I should even word it like that say it like you know but but you know bringing them on legitimately they haven't you know I just wanted to reiterate this is illegal unless they have a legitimate work to do correct and then it based on who how much they raise and but I but I wanted to go just one step a little further into that and because it's common in the industry to have you know to bring somebody on that can raise a lot of capital and let's say you know they do you know that's a big value that they're bringing but let's say we're gonna pay them a certain amount they'll have other jobs you know in the in the business plan but then they also have let's say five to ten people under them that could that are raising capital through them for that opportunity and yeah so that's fine so as long as they again as long as they're not getting again one of the let me just backtrack the fact that you give them shares in your condo not shares but limited liability but they're essentially shares in your company in the form of GP that is still compensation so whether you get somebody cash you give somebody share something that's all compensation so as long as you're not compensating for them to raise money you're fine but yes if somebody comes in in an LLC right I mean in your your you bring in a corporation or a company and anybody in that company now assuming that company is a legitimate co-sponsors and obviously they have employees and they have you know team members and those people can certainly go out there along with along with everybody else who's a co-sponsor they essentially become agents of the coast of the co-sponsors part of the co-sponsorship so I don't have a problem with that at all but they do them the main company that you've brought in as a co-sponsor needs to be a legitimate co-sponsor it needs to be some really compensated but like they're doing all this work and in exchange for all this work and bringing their expertise and helping you under right and helping you do due diligence and when you put the business plan together helping you investor relations all that stuff they're obviously gonna get compensated in the way they do that is through a percentage of the company but it's not for raising money nice nice mercy or anything else on this subject specifically you'd like to let the listeners know or tell you know I appreciate your time tell the listeners you know don't tell them how you like to get back yeah so becoming a little bit more active on Facebook so if you track me down with Facebook you'll see some of the videos I just started a YouTube channel and debris it's really a couple weeks old so there's probably three or four views on there so it appreciate some views over there but if you're really if you're into in that social media video series it's probably coming out here in the next week or two although maybe about time this is released it's done if you want to shoot me an e-mail at team te am at premier law group nets team at premier law group I bet I'll make sure they send that to you when it's available and as you can see I'm super fancy and on this great stop a simple email and I'll get you on the list and send that information out to you that's very valuable any other way they should know how to get in touch with you Mauricio that's the main one I mean you can always look at my website from your Law Group done that but that's probably the easiest way to get to hold them you look and I'm always happy to talk to you to your listeners so if anybody wants to hop on a call I'm happy to do a complimentary call with them as well again that email will get get to me and happy to talk to me in person or happy to send them the collateral that I have well thank you for providing so much value to the listeners today Mauricio I mean because it's such a big topic I hear at every conference I hear at numerous times people talk to me every week numerous times about raising capital getting started and we want to make sure we're doing it legally and as appreciate you like I said we hammered it and and I um we need to I mean it's got a you know go in as depth as we can and just appreciate that a lot but I appreciate the listeners being with us today and every day and I hope you will be back every day and I hope you are going on the Facebook group the real estate syndication show be sure to be active in there and so we can all learn from experts like Mauricio and grow our businesses together legally and so we will talk to each of you tomorrow thank you for listening to the Real Estate syndication show brought to you by LifeBridge capital life bridge capital works with investors nationwide to invest in real estate while also donating 50% of its profits to assist parents who are committing to adoption life bridge capital making a difference one investor and one child at a time connect online at WWF bridge capital comm for free material and videos to further your success [Music]