BitShares Forum
Main => General Discussion => Topic started by: wesphily on January 20, 2015, 03:22:46 am
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Hello,
I have been spending a lot of time learning everything I can about real estate from a veteran in the field. I am now in the phase of creating a business plan. My intention is to create a LLC that will invest in real estate. Is it legal to sell shares in a company through bitshares if it is a LLC? If it is not legal then is there a creative way that I could incorporate bitshares to increase investment leverage?
If this is not the correct place for this then please feel free to move the post
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Bitshares provides you with the tools you need to legally issue shares of your company onto the BTS blockchain. In particular, you need to have the ability to whitelist keys and freeze share transfers and trading.
There's not really a "shortcut" to going around the laws you need to follow for a traditional security. The few business models that can be fully "DACified" are rare, and real estate investing is not really one of them.
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I definitely do not want to get around laws. My goal is to increase my leverage so that I can do larger and more profitable deals. I am hoping that I can utilize bitshares in some way to accomplish this.
Why would real estate not be "dacafiable?" There are several publicly traded real estate firms.
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I definitely do not want to get around laws. My goal is to increase my leverage so that I can do larger and more profitable deals. I am hoping that I can utilize bitshares in some way to accomplish this.
Why would real estate not be "dacafiable?" There are several publicly traded real estate firms.
Basically you're looking to issue your equity onto a blockchain. You can do that!
Being publicly traded doesn't make your company decentralized or autonomous. You will still be a traditional centralized company with a traditional centralized incentive structure, you'll just have your shares use hip new technology instead of being listed on NASDAQ.
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I definitely do not want to get around laws. My goal is to increase my leverage so that I can do larger and more profitable deals. I am hoping that I can utilize bitshares in some way to accomplish this.
Why would real estate not be "dacafiable?" There are several publicly traded real estate firms.
Basically you're looking to issue your equity onto a blockchain. You can do that!
Being publicly traded doesn't make your company decentralized or autonomous. You will still be a traditional centralized company with a traditional centralized incentive structure, you'll just have your shares use hip new technology instead of being listed on NASDAQ.
That's exactly what I want to do. The reason I'm not going to be listing on Nasdaq/S&P 500/whatever is because my company would not qualify. It could qualify on bitshares though. It would enable a small business like mine to conquer larger deals while returning decent profit to serious investors.
However, would this idea be completely dismissed since the company itself would not be a dac? Has anybody else discussed an idea like this?
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Is somebody working on a whitepaper for User issued assets? I too have been trying to find answers to questions about their function and how they allow compliance with securities laws.
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Is somebody working on a whitepaper for User issued assets? I too have been trying to find answers to questions about their function and how they allow compliance with securities laws.
http://bytemaster.bitshares.org/article/2015/01/09/Overstock-to-Crypto-Stock/
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Some people create a new LLC for each deal depending on if the same partners are used are not. LLC is popular due to no double tax. Would it be ideal to create a new asset for each deal? I could setup the terms so that investors know exactly what they could return.
The only downside is that I'm not sure how to make it trustless. I'd have to somehow prove to others my intent to perform.
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Some people create a new LLC for each deal depending on if the same partners are used are not. LLC is popular due to no double tax. Would it be ideal to create a new asset for each deal? I could setup the terms so that investors know exactly what they could return.
The only downside is that I'm not sure how to make it trustless. I'd have to somehow prove to others my intent to perform.
Even though LLC can avoid the so-called 'double tax', a corporation will give you better legal protection. The entity is separate from the individual. A corporation issues shares and you can use bitshare as a tool to issue share as tokens. You can use the user-issued-asset for this or you can have your own bitshare tool where each 'bts' is treated as a share in your corporation.
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Some people create a new LLC for each deal depending on if the same partners are used are not. LLC is popular due to no double tax. Would it be ideal to create a new asset for each deal? I could setup the terms so that investors know exactly what they could return.
The only downside is that I'm not sure how to make it trustless. I'd have to somehow prove to others my intent to perform.
Even though LLC can avoid the so-called 'double tax', a corporation will give you better legal protection. The entity is separate from the individual. A corporation issues shares and you can use bitshare as a tool to issue share as tokens. You can use the user-issued-asset for this or you can have your own bitshare tool where each 'bts' is treated as a share in your corporation.
That may be the only true way. It is many times more cumbersome/regulated/expensive to do though. My hope is that bitshares has the power to enable people on the lower end of the spectrum. If it can't then I'll need to wait for a feature/coin that can if it ever exists. "Doing for business what bitcoin did....." I'd like to believe small businesses were thought of in that quote. The first coin that can incubate small businesses will easily beat out other coins.
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Bitshares can do your accounting and track property rights, but it cannot make it trust free.
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What will happen if someone lost his/her token? In real world, you can get back the account will your ID card or other things. it is dangerous to use bitshare because once one's computer is hacked and the shares will be lost and could never get back.
Can some give solutions to solve this problem?
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Bitshares can do your accounting and track property rights, but it cannot make it trust free.
I understand how it can do accounting. How can it track property rights?
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What will happen if someone lost his/her token? In real world, you can get back the account will your ID card or other things. it is dangerous to use bitshare because once one's computer is hacked and the shares will be lost and could never get back.
Can some give solutions to solve this problem?
This is a unique problem to crypto shares. There most likely is not a solution that you would like. I expect that it would mean that you just lost a lot of uninsured money. You could try to use law to find and sue the guilty party, but the chances of that being successful or almost -%.
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What will happen if someone lost his/her token? In real world, you can get back the account will your ID card or other things. it is dangerous to use bitshare because once one's computer is hacked and the shares will be lost and could never get back.
Can some give solutions to solve this problem?
This is a unique problem to crypto shares. There most likely is not a solution that you would like. I expect that it would mean that you just lost a lot of uninsured money. You could try to use law to find and sue the guilty party, but the chances of that being successful or almost -%.
With new UIA system you can white list owner accounts which will prevent theft by strangers and who ever is in charge of "the books" can retain full control over all shares. As long as they don't lose their cold multi-sig keys then it should be fine.
That said, this market is very young and immature so use at your own risk.
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Bytemaster,
That sounds cool. Is that what you meant by tracking property rights?
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I too have thought about this but I am not sure how it would be possible.
http://www.investopedia.com/terms/s/security.asp (http://www.investopedia.com/terms/s/security.asp)
Any thoughts on the above?
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What about a REIT that only sold to people not living in the US. That might get you off the SEC's radar.
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What about a REIT that only sold to people not living in the US. That might get you off the SEC's radar.
REIT has a ton of requirements. I personally would not qualify for this since a majority of my income does not come from real estate currently. Most of my income comes from IT.
EDIT: I'm trying to avoid heavily regulated options.
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Another issue that nobody has brought up yet is that in the US, I believe it's illegal for the owners of a publicly-traded company to be anonymous. This is the issue the whitelisting is trying to get around, I think. But for you as the guy running the company, I think you have to keep paperwork that shows exactly who owns which shares of the company at any given time.
If you tried to structure your securities as a debt instrument, this might not apply... but I am not experienced in such things.
Sent from my SCH-S720C using Tapatalk 2
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Another issue that nobody has brought up yet is that in the US, I believe it's illegal for the owners of a publicly-traded company to be anonymous. This is the issue the whitelisting is trying to get around, I think. But for you as the guy running the company, I think you have to keep paperwork that shows exactly who owns which shares of the company at any given time.
If you tried to structure your securities as a debt instrument, this might not apply... but I am not experienced in such things.
Sent from my SCH-S720C using Tapatalk 2
Is it possible to limit the number of shares that an asset allows? I do not want to open up the LLC to random 1$ investors. They will not receive a good roi, and it would be a nightmare for me to try to keep track of a million 1$ investments.
EDIT: Can a feature request be made to allow accounts to input all of that information so that they can be "pre-approved" for investments similar to this? Decentralized protection of data that allows you to purchase shares in centralized companies sounds good in my head.
Also, whitelisting: does this mean I could whitelist particular account names so that only they could purchase a share? If so then that would be great since I could gather all the "know your customer" (in this case partner) information needed for the LLC.
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While I don't have much to contribute to this thread, I just wanted to say thank you to wesphily for asking these important questions, slashing a path through this uncharted dense jungle of regulation, allowing others to follow in your footsteps.
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I'm highly interested with incorporating bitshares into my REI LLC. Can a developer please acknowledge that you see the questions below? I don't need answers to them right away, but it would be nice to know that you see them so that you can think about them when possible.
Is it possible to limit the number of shares that an asset allows? I do not want to open up the LLC to random 1$ investors. They will not receive a good roi, and it would be a nightmare for me to try to keep track of a million 1$ investments.
EDIT: Can a feature request be made to allow accounts to input all of that information so that they can be "pre-approved" for investments similar to this? Decentralized protection of data that allows you to purchase shares in centralized companies sounds good in my head.
Also, whitelisting: does this mean I could whitelist particular account names so that only they could purchase a share? If so then that would be great since I could gather all the "know your customer" (in this case partner) information needed for the LLC.
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I'm highly interested with incorporating bitshares into my REI LLC. Can a developer please acknowledge that you see the questions below? I don't need answers to them right away, but it would be nice to know that you see them so that you can think about them when possible.
Is it possible to limit the number of shares that an asset allows? I do not want to open up the LLC to random 1$ investors. They will not receive a good roi, and it would be a nightmare for me to try to keep track of a million 1$ investments.
Your company won't be publicly traded anyway. You will be whitelisting keys and so you can make people agree to whatever terms you want. Did you mean to ask, even among people you explicitly whitelist, don't allow them to own less than X number of shares? I don't think that makes sense. Obviously you can limit the number of shares you issue, if that's what you actually meant.
EDIT: Can a feature request be made to allow accounts to input all of that information so that they can be "pre-approved" for investments similar to this? Decentralized protection of data that allows you to purchase shares in centralized companies sounds good in my head.
You'll need to do this info verification outside of our system on your, at least until someone makes a service to make it easier. You'll probably have a lot of manual processing to do anyway.
Also, whitelisting: does this mean I could whitelist particular account names so that only they could purchase a share? If so then that would be great since I could gather all the "know your customer" (in this case partner) information needed for the LLC.
Yes, that's the point - you can only legally issue shares if you know who the owners are.
Remember that bitshares is JUST a database that keeps track of who has what. We can make ownership transfer restricted in the ways that make the thing you are transferring a legally compliant share of your company, in particular restricting ownership to people you approve. Everything else is still completely up to you.
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I'm highly interested with incorporating bitshares into my REI LLC. Can a developer please acknowledge that you see the questions below? I don't need answers to them right away, but it would be nice to know that you see them so that you can think about them when possible.
Is it possible to limit the number of shares that an asset allows? I do not want to open up the LLC to random 1$ investors. They will not receive a good roi, and it would be a nightmare for me to try to keep track of a million 1$ investments.
Your company won't be publicly traded anyway. You will be whitelisting keys and so you can make people agree to whatever terms you want. Did you mean to ask, even among people you explicitly whitelist, don't allow them to own less than X number of shares? I don't think that makes sense. Obviously you can limit the number of shares you issue, if that's what you actually meant. Something like 1-5% of companies become $1million dollar companies. Even fewer of those become publicly traded.
EDIT: Can a feature request be made to allow accounts to input all of that information so that they can be "pre-approved" for investments similar to this? Decentralized protection of data that allows you to purchase shares in centralized companies sounds good in my head.
You'll need to do this info verification outside of our system on your, at least until someone makes a service to make it easier. You'll probably have a lot of manual processing to do anyway.
Also, whitelisting: does this mean I could whitelist particular account names so that only they could purchase a share? If so then that would be great since I could gather all the "know your customer" (in this case partner) information needed for the LLC.
Yes, that's the point - you can only legally issue shares if you know who the owners are.
Remember that bitshares is JUST a database that keeps track of who has what. We can make ownership transfer restricted in the ways that make the thing you are transferring a legally compliant share of your company, in particular restricting ownership to people you approve. Everything else is still completely up to you.
Thanks for the responses. I hope you all are able to expand usability in the future. I understand it's use now, but it seems too limited to use.
Online centralized exchanges take care of all the partner information for the companies being traded. This is a very valuable service. I hope that bitshares can do that one day as well.
Finally, this may work great for c-corps, but it will not work for small companies. Partnership is different and has different regulations. Small businesses are a big part of commercial. Would be nice to have solutions for them too. Something like 1-5% of companies become $1million dollar companies. Even fewer of those become publicly traded.
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It easily works for any size company. I have plans to work with a lawyer to write a book about how to do this with BitShares.
First we actually need to enable the white list feature that have been implemented and this is still several weeks away. Then we need to add GUI tools to help manage your white list.
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I think we should consider finding an accountant or lawyer to run as a delegate specifically to help folks navigate through the process of setting up a bitAsset/bitCompany/bitCorp etc, as well as provide review/advisory services on the compliance of bitAsset listings.
The last thing we want is a bunch of honest people getting nailed with securities fraud, or worse, scammers committing fraud and sullying the brand.
US/Can centric 'incubator' at first, but as the delegate income grows it is completely conceivable to have a delegate managing an international team of accountants/lawyers/consultants helping business around the globe with bitAssets.
Would be fantastic to start building precedent case law and a body of knowledge/experience around bitAsset issuance and interfacing with the 'real' world.
Incidentally, bitAssets render Kickstarter and Lighthouse obsolete... folks can now issue shares in their ideas instead of having to pussyfoot around with 'rewards' etc.
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I think we should consider finding an accountant or lawyer to run as a delegate specifically to help folks navigate through the process of setting up a bitAsset/bitCompany/bitCorp etc, as well as provide review/advisory services on the compliance of bitAsset listings.
The last thing we want is a bunch of honest people getting nailed with securities fraud, or worse, scammers committing fraud and sullying the brand.
US/Can centric 'incubator' at first, but as the delegate income grows it is completely conceivable to have a delegate managing an international team of accountants/lawyers/consultants helping business around the globe with bitAssets.
Would be fantastic to start building precedent case law and a body of knowledge/experience around bitAsset issuance and interfacing with the 'real' world.
Incidentally, bitAssets render Kickstarter and Lighthouse obsolete... folks can now issue shares in their ideas instead of having to pussyfoot around with 'rewards' etc.
Everything you just described refers to UIA's, not bitassets.
I guess this post suggests that we need to give up on having "bitasset" mean market-pegged asset...
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I think we should consider finding an accountant or lawyer to run as a delegate specifically to help folks navigate through the process of setting up a bitAsset/bitCompany/bitCorp etc, as well as provide review/advisory services on the compliance of bitAsset listings.
The last thing we want is a bunch of honest people getting nailed with securities fraud, or worse, scammers committing fraud and sullying the brand.
US/Can centric 'incubator' at first, but as the delegate income grows it is completely conceivable to have a delegate managing an international team of accountants/lawyers/consultants helping business around the globe with bitAssets.
Would be fantastic to start building precedent case law and a body of knowledge/experience around bitAsset issuance and interfacing with the 'real' world.
Incidentally, bitAssets render Kickstarter and Lighthouse obsolete... folks can now issue shares in their ideas instead of having to pussyfoot around with 'rewards' etc.
Everything you just described refers to UIA's, not bitassets.
I guess this post suggests that we need to give up on having "bitasset" mean market-pegged asset...
Yes, the distinction is going to get lost.
UIA's and bitAssets are invariably going to get lumped together during adoption... as is clearly already happening.
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Will the bitshares client ever be able to include personal information required by regulation? If not then it would be nice if somebody wrote software to suppliment the white list feature.
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Will the bitshares client ever be able to include personal information required by regulation? If not then it would be nice if somebody wrote software to suppliment the white list feature.
you could do this already today .. your account name registered on the blockchain can contain arbitrary json formated data ...
(wallet closed) >>> blockchain_get_account xeroc
Name: xeroc
.........
Public Data:
{
"slate_id": 6136676347887220980,
"mail_server_endpoint": "127.0.0.1:19999",
"mail_servers": [
"xeroc"
]
}
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Will the bitshares client ever be able to include personal information required by regulation? If not then it would be nice if somebody wrote software to suppliment the white list feature.
you could do this already today .. your account name registered on the blockchain can contain arbitrary json formated data ...
(wallet closed) >>> blockchain_get_account xeroc
Name: xeroc
.........
Public Data:
{
"slate_id": 6136676347887220980,
"mail_server_endpoint": "127.0.0.1:19999",
"mail_servers": [
"xeroc"
]
}
That's great! It needs to be viewable in a user friendly way to be marketable though
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Does bitshares have a "trust" or "escrow" capability? This is key to try to make the LLC as trustless as possible. I want investor funds held in a trust/escrow so that they are only released upon certain conditions.
Also, I may have figured out a way to use bitshares for the LLC. I'll share more details once I meet with some lawyers.