What’s an SPV and do you need one as a small business?

By Samantha Higgins

If you’re looking to invest in a new business venture, you may have come across the term “special purpose vehicle.” Your goal may be to securitize a loan. Perhaps you’re interested in a joint venture and are looking for an appropriate way to structure it. It’s also possible you want to protect your firm’s intellectual property. In any case, a special purpose vehicle may be what you need.

But what exactly is this type of investment, and how can it benefit your business? Here’s what you need to know:

What is a special purpose vehicle?

A special purpose vehicle (SPV) is any company or entity that is created for a specific purpose. It can be used for securitization, joint ventures, and other business purposes.

The key feature of an SPV is that it is separate from the company that creates it. This separation allows the SPV to have its credit rating and debt structure.

This separation also provides some legal protection to the parent company. The SPV itself is considered a separate entity, so it may be subject to different laws and regulations than its parent company. For example, if an SPV goes bankrupt, creditors cannot go after the assets of the real estate investment trust that owns it.

Investing through an SPV offers several benefits to small businesses.

It can save your company from higher taxes

When a company sets up an SPV, it can transfer some of its assets to the new company. This can help the company avoid paying taxes on those assets.

For example, a company that owns a rental property may set up an SPV to own and manage the property. This would allow the company to avoid paying taxes on its rental income.

The company can also use the SPV to hold its assets. This would allow the company to avoid paying taxes on any profits it makes from those assets.

It can help you protect your company’s assets

If your company is sued, the plaintiffs may try to go after its assets. However, if those assets are held by an SPV, they may be protected from the lawsuit.

This can be a valuable asset for companies that want to protect their intellectual property or other sensitive information.

An SPV can also be used to protect your company’s assets from creditors.

For example, if you have a large amount of debt, it might be wise to transfer some of your assets into an SPV so they won’t be seized by creditors in the event that you default on your loans.

It can help you raise money for your company

Securitization is one way that companies can raise money. This process involves selling assets to investors as bonds or other securities and using the proceeds from those sales to fund new projects or pay off existing debts.

Remember that these assets can be held by the company itself, or they can be transferred to an SPV.

The advantage of using an SPV is that it allows you to raise money without increasing your debt load. This means that if you have a limited amount of cash on hand, you won’t have to borrow more to fund your new project.

It can help you structure joint ventures

A special purpose vehicle can also be used to structure joint ventures. This is a common way for companies to work together without risking their assets.

For example, two companies could set up an SPV to create a new product. This would allow them to share the costs and risks associated with developing the product.

An SPV can also be used to manage a joint venture. For example, if two companies are working together to build a new factory, the SPV could be responsible for hiring workers and managing the day-to-day operations of the factory.

Remember that you may need SPV administration services to properly manage your SPV well enough to enjoy this benefit.

So, do you need an SPV as a small biz?

If you have a small business, then you should know that setting up an SPV is a great way to structure your company.

It can help protect your assets from creditors and lawsuits, save you from higher taxes on your income or profits, raise money for new projects without increasing your debt load, and even allow you to structure joint ventures with other companies.


Samantha Higgins is a professional writer with a passion for research, observation, and innovation. She is nurturing a growing family of twin boys in Portland, Oregon, with her husband. She loves kayaking and reading creative non-fiction.

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