what is a special purpose vehicle spv 
a special purpose vehicle is a subsidiary created by a parent company to isolate financial risk it s also called a special purpose entity spe its legal status as a separate company makes its obligations secure even if the parent company goes bankrupt a special purpose vehicle is sometimes referred to as a bankruptcy remote entity for this reason these vehicles can become a financially devastating way to hide company debt if accounting loopholes are exploited as seen in the 2001 enron scandal theresa chiechi investopediaunderstanding special purpose vehicles spvs a parent company creates an spv to isolate or securitize assets in a separate company that s often kept off the balance sheet it may be created to undertake a risky project while protecting the parent company from the most severe risks of its failure or solely to securitize debt in some cases so investors can be assured of repayment 1the operations of the spv are limited to the acquisition and financing of specific assets in any case the separate company structure serves as a method of isolating the risks of these activities an spv may serve as a counterparty for swaps and other credit sensitive derivative instruments a company can form the spv as a limited partnership a trust a corporation or a limited liability company llc among other options it may be designed for independent ownership management and funding spvs help companies securitize assets create joint ventures isolate corporate assets or perform other financial transactions spvs are used in venture capitalism by a group of investors to pool their assets to launch a new business or invest in a startup spvs typically make just one investment into a business whereas an investment fund would make multiple investments over some time financials of an spvthe financials of an spv may not appear on the parent company s balance sheet as equity or debt its assets liabilities and equity will be recorded only on its own balance sheet instead an investor should always check the financials of any spv before investing in a company remember enron the spv can therefore mask crucial information from investors who aren t getting a full view of a company s financial situation investors must analyze the balance sheet of the parent company and the spv before deciding whether to invest in a business 