Structuring a Partnership - Title & Financing

[Mark Sandlin]

First post on BP!!

I am working on a JV agreement to get started. Planning to have a capital partner provide the bulk of the investment capital and a services partner would be responsible for locating, overseeing rehab, property management, etc.

The cleanest way to do this would be both partners to form a legal entity (LLC), have the entity create a bank account, get financing, and hold title. However it seems there are many more financing options available if the investment capital partner covers the financing and holds title in his own name. So we may go the route of having a JV agreement, holding title in the name of the capital partner, having a shared bank account, and an umbrella policy.

Questions:

1. Putting aside liability protection, so long as the property is specified in the JV agreement, does it matter for tax purposes if the title is held by either partner, rather than the LLC? My understanding is that a "tax partnership" is formed by a joint venture regardless of whether a business entity is formed. So then to for capital partner and services partner to split profits 50/50 with respect to this property should be ok, regardless of who holds title? Reference Podell v. Commissioner. 

2. Based on above, we could create an LLC or LP to have a EIN and cleaner tax returns. We could also document an assignment of interest in the property to the LLC for peace of mind? Understanding again this would accomplish nothing in terms of liability protection, but from simplicity of bookkeeping, tax reporting, etc. It would seem then that both partners would be able to deduct their share of losses, etc.

Understanding that nobody here will give tax advice, what have you seen in practice?  Any other suggestions?

Especially interested in hearing from the experts on this thread https://www.biggerpockets.com/...

@Nicholas Aiola, @Natalie Kolodij , @Steven Hamilton II , @Linda Weygant , @Lance Lvovsky , @Stanley Bronstein 
@Michael Plaks, @Margaret Feit