Forming partnership of 6-10 people

[Chad Hurin]

Forming partnership of 7-10 people...(closer to 6-7)

So a few colleagues of mine are interested in pooling money every month to form a buy-&-hold rental company that would buy rental properties every few months. Thoughts on formation, best way to split, responsibilities, resources for this topic, etc. Any tips would be great. If you know or have done a partnership like this, please give me your thoughts and ideas.

Questions I have:

• How to split ownership?
  
• If one or more people end up not wanting to contribute to buy more properties, how is share split up then?
  
• Forming LLC: how to contribute money monthly to business account from each member? Allowed? (capital contributions? Shares?)
  
• Decision making?
  
• If we decide to have payout every month; process?
  
• Or should keep in business account? (assuming we have savings for 6-12 months bills)

Many, many, other questions; I’ll start there.

We are in NC- we all make same salary (for now)- relatively same goals (for now)- Same age group

Any info would be helpful,

Thank you,

Chad 

[Jon Holdman]

With that many people involved you really need to work with a securities attorney to do a formal private placement memorandum, operating agreement and SEC and state filings.  There is a VERY good chance one of you will end up dissatisfied.   If you assume that won't happen, you will be in trouble when it does.  If you assume it will happen, and do your paperwork correctly you'll be protected when it does.  Unfortunately, its not cheap to do this right.  I've heard numbers ranging from $10K to $25K.

The issues you mention are just a few of the ones you want to address.  What if one of you dies?  Gets married?  Gets divorced?  Desperately needs cash?  What if the group needs cash and someone can't ante up?  What if one of you gets sued and loses?