Who is special purpose vehicle

It is sometimes called a special purpose entity SPE. An SPV has assets, liabilities, and a legal status outside of the obligations of the parent company. The primary purpose of an SPV is to carry out a specific business activity outside of the parent company, therein protecting the parent company from risks such as bankruptcy and insolvency issues.

SPVs are formed as limited partnerships, trusts, corporations , or limited liability companies. They adopt the legal protections of the particular business entity. An SPV is created for independent ownership, management, and funding of a company. All capital is usually called upfront, eliminating the need for capital calls through the life of the fund. Other key features include:. Once the structure is set up, Assure, through Glassboard, is equipped to facilitate the creation of series investment entities at volume with a management structure that is efficient and cost-effective.

If an SPV has unique needs, Assure is fully capable of working with the SPV Organizer and its counsel to modify the structure and documents, as necessary. SPVs can be used to facilitate investments into various types of assets and the SPV structure can be modified to meet specific needs.

For example, an SPV can be used to invest into startups, real estate, private funds, or other assets. SPVs are used to invest in various asset types, from startups raising seed capital , to the purchase of secondary shares in pre-IPO companies.

Companies can transfer property ownership to an SPV and sell off that entity, paying lower capital gains tax instead of property sales tax. Banks can sell mortgage assets to SPVs, lowering the leverage on their own balance sheets. Special purpose vehicles have their own obligations, assets, and liabilities. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts.

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A special purpose vehicle SPV , also called a special purpose entity SPE , is a subsidiary created by a parent company to isolate its financial risks.

Accounting Entity An accounting entity is a distinct economic unit that isolates the accounting of certain transactions from other subdivisions or accounting entities.

Structured Investment Vehicle SIV Definition A structured investment vehicle SIV is a pool of investment assets that attempts to profit from credit spreads between short-term debt and long-term structured finance products. An asset-backed security ABS is a debt security collateralized by a pool of assets.

Enron Enron was a U. The underlying private assets that SPVs are used to to invest in can range from startup equity, private company debt, real estate, alternative assets, secondaries or other high-risk ventures or investments. Regardless of the purpose, SPVs protect the partners in the entity from risk, even if the underlying asset flounders. In other instances, an SPV may be designed exclusively to securitize debt so investors are confident in ultimate reimbursement. Overall, operations of the SPV pertain solely to the acquisition and financing of specific assets.

Given the nature of the separate legal structure, this architecture isolates the risks of the associated activities engineered by the startup company or asset. There are a variety of investor types in an SPV, including an individual, trust, limited partnership, LLC or other corporation, or retirement accounts, among many other options. As discussed above, SPVs have a variety of uses for a variety of purposes.

Some of the most common SPV uses include:. The most common use for SPVs today is for deal-by-deal investment into early stage startup companies. Raising capital with an SPV allows for up to accredited investors to pool their investment capital into a startup company. Startup companies that are fundraising like SPVs because it keeps the startup's cap table clean.

Certain projects entail more financial risks than others.