Business Structure of LLC and partners

[Paul LaSpina]

Advice would be appreciated. I am funding a partnership with an "Operating" partner. His LLC will be the "GP" general partner with my LLC as the limited partner. He is coming in with NO capital but as the operating/Property management/Construction partner. He will provide all the due diligence, acquisition, rehab, and property management of all acquisitions. He will get small percentages for construction and property management throughout the term of ownership of the properties. As well as 50/50 equity share. In essence, I am simply the passive investor with 50% equity. I will finance and determine exit strategies of ALL properties. Should I allow these terms? should I come into this agreement as the "Limited partner? Should i suggest a different LLC set up to protect my interests more?

Thank you in advance!

[Basit Siddiqi]

@Paul LaSpina

I think there is some confusion in this thread because of the incorrect use of certain terms.

LLC is a limited liability company and the owners of the LLC are called members. Members who are active in the LLC are called Managing-Members. There are no partners in an LLC. Therefore the use of "limited partner" and "general partner" makes things confusing.

A limited partnership is a partnership where one partner within the limited partnership has to be a general partner. The general Partner will take on all liabilities in the case the partnership gets sued. Limited Partners are those who are not active and can only lose what they contributed to the partnership. There are no members in a limited partnership.

Furthermore - you can't be a limited partner if you are providing day to day input.

Syndication - There are many definitions of syndication but most people think of it when you are looking to obtain capital from private investors. This may require compliance with SEC laws.