LLC partnership question

[Jan H.]

I would like to get some ideas from you experienced RE investors out there on structuring a partnership my friend and I about to enter into.

We (two of us) are planning to form an LLC with some cash and start buying multi-unit properties out of state (we're in CA currently). Since we both have different amount of money available to us to invest, we'd like to structure the partnership in an equitable way so it is a win-win for everyone.

Let's say we all put in $50,000k each into the LLC as starting capital. We use the capital for down payments and finance the rest of the purchases through traditional financing. We both can get mortgages in our names and as long we finance the same amount of properties/loans, we should be 50-50 partners, meaning that all equity and cash flow as well as expenses/tax liability gets halved.

Here are the questions:

1. What happens if we 'burn through' the initial capital and only one of the partners can contribute with more capital? How would the equity portion/cash flow get split up?

2. Let's say partner A contributes the down payment and partner B would get the financing? Would a 50-50 split be acceptable? What is worth more: capital or financing?

3. How are responsibilities split-up usually? (acquisition, managing PMs and subs, accounting, etc.)

Since we do not have experience in putting together a RE deal, I wanted to see if any of you could offer some word of wisdom...much appreciated!

[Ned Carey]

@Jan H. all of these items are negotiable. 

1. You can remain 50/50 and the additional money treated as a loan. You could also split ownership and or cash flow based on the proportions of the capital accounts. 
2. It all depends on what you two decide. In part it depend on which is harder for you to get. 
3. Responsibilities are usually split based on who has the appropriate skills. However there is no reason one person could do all the work and the other person puts in all the money, and you split 50/50

There are many factors regarding what each of you brings to the table. Only you guys can decide what is fair. Here aer some ideas about how to split

• everything 50/50, this is the simplest but not necessarily the fairest. 
• Ownership 50/50 and additional money put in and taken out as loans
• Ownership of equity (who get how much when everything is sold) can be a different split than split of cash flow.
• If one guy does most of the work and the other guy is more of a silent partner then the work guy could take a salary

The options are almost unlimited. You have some serious thinking to do.