If you are frequently searching forhow to create an opportunity fund, you should know that these types of investments are lucrative but require some essential steps and good planning. To structure properly a QOZ investment- Qualified Opportunity Zone – so that you can qualify for different tax incentives, every investor needs to create an investment tool called a QOF- Qualified Opportunity Fund. This fund will be used to invest the capital gains for about six months (180 days)
Typically, there are at least five different requirements that you need to adhere to to be considered a QOF-Qualified Opportunity Fund. So how to create an opportunity fund?
- Firstly, the QOF-Qualified Opportunity Fund must be an investment tool structured as a partnership (LLC) with at least two members. Alternatively, you can structure an S Corporation.
- The Qualified Opportunity Fund must be an entity that adheres strictly to the US legal system.
- Every document drafted regarding the Qualified Opportunity Fund must clearly state that the primary purpose of the legal entity is to invest solely in opportunity zone properties. Some primary organizing documents you will need to draft include a partnership agreement, an operating agreement, articles of incorporation, and many others. Also, these documents must include a detailed description of the business in general. If you need professional help with the Qualified Opportunity Zones program, you should find an attorney specializing in this topic.
It is essential to mention that an opportunity zone investor has to give up cash or specific property to the QOF in exchange for an equity interest in the respective qualified opportunity fund. As an investor, you can also invest as much capital as you wish into the Qualified Opportunity Fund. However, you will enjoy tax-free benefits only for the amount that equals your capital gains. This tax-free amount is also known as “qualifying interest.” Also, only after you create a Qualified Opportunity Zone Business will you become eligible to acquire qualified opportunity zone property through the fund.