A new LLC is created. The single-purpose LLC owns the property. Shares of the entity are then sold to investors as outlined in the Private Placement Memorandum (PPM).
All investors own a share of the property LLC, as limited partners (passive investors), with no risk beyond their initial investment. Limited partners are not on the loan and are not responsible for the performance or management of the property.
The general partners (the sponsor) operate through a different entity, the management entity, which assumes all responsibilities and risks of the property LLC.
Per the SEC guidelines; each investor will first be qualified and then sent the PPM and the subscription agreement, prior to investing.
The new LLC and the SEC documents will both be prepared by a licensed attorney.