Capital Calls:
Frequently Asked Questions
Quick answers to the most common questions about capital calls, tax implications, and LLC obligations.
What triggers a capital call?
A capital call is triggered when the fund manager (General Partner) identifies a specific need for capital, such as closing on a new investment, funding renovations or improvements, paying fund expenses, or paying down a subscription line of credit. The GP issues a formal notice to investors detailing the amount and due date.
How long do you have to pay a capital call?
Investors typically have between 10 and 15 business days to fund a capital call after receiving the notice. The exact timeframe is specified in the fund's Limited Partnership Agreement (LPA). Failure to wire funds by the deadline can result in interest penalties or default proceedings.
Is a capital call taxable?
No, paying a capital call is not a taxable event. It is considered a contribution of capital that increases your cost basis in the investment. You are generally taxed only when the fund generates income or distributes gains, not when you contribute money.
What is the difference between committed capital and called capital?
Committed capital is the total amount you agreed to invest over the life of the fund. Called capital (or paid-in capital) is the portion of that commitment you have actually transferred to the fund so far. The remaining uncalled amount is your "unfunded commitment."
What is a capital call in an LLC?
In an LLC (common in real estate syndications), a capital call is a request for members to contribute additional funds beyond their initial investment. These are often used for unexpected repairs, operating shortfalls, or debt refinancing. The Operating Agreement dictates whether these calls are mandatory or optional and the consequences of non-payment.