Best Entity and Structuring for 50/50 partnership

[Rachel Simpson]

Hello all-

This is my first post and I am floored by the knowledge here, so I am hoping I can get some solid and helpful answers! I already own two duplexes on my own which I hold in an LLC. I am looking to purchase a few properties with a family member. We have partnered before as they hold a mortgage for one of my existing properties. Things are going well with that.

To keep things simple for these new investments, the plan is to split costs 25/75. They will put 25% down and I will finance the rest. We will continue that pattern with all expenses (repairs, taxes, etc) to keep things simple. All owner draws will also be paid out in that ratio. My question is: what entity is best for holding these assets? We are thinking about a multimember LLC with 25% 75% split ownership written into the operating agreement. Does anyone have information for or against this plan? Open to all suggestions.

Thank you!

[Sergey A. Petrov]

is this a 50/50 (the subject of your post) or a 25/75 (the contents of your post) partnership? regardless, the ratio should be based on what each partner puts into the property. if one contributes $1 and the other $9, your initial ratio is 10/90. if you are financing 75% out of pocket, there should be a note / loan with an amortization schedule and the LLC should make monthly payments to you as if you were a third party lender. the LLC should have its own financials. If it cash flows, the distributions are based on each partner's equity stake. If it doesn't cash flow the contributions are based on each partner's equity stake. The property / LLC runs on its own as a completely separate entity. A partnership or an operating agreement is always warranted - there is more to it than just handling the day to day (what happens when someone wants out or wants to sell their share to a third party)?