Creating an LLC with my GC and want to do it right

[Kyle McCorkel]

I've been working with a GC on several different rehabs (BRRRR's and 1 flip), and he's done an awesome job. He's got a crew of highly skilled guys and also has a network of subcontractors and he just gets stuff done - high quality and fast. After working with him the last 2 years and getting to know him, found out he's also an investor and has completed several BRRRR's of his own.

He's my age and has similar goals and values as me.  Business savvy, reasonable, and wants to treat people right.  You learn these things about people after working with them in multiple situations.

We've realized that we each have specific and complementary strengths: he is obviously good at construction and also property/tenant management.  I'm good/better at finding deals, financing them with short term cash, and refinancing or selling.

We've decided to partner up so we can each focus on our strengths.  Our vision would be if I can focus on finding deals and money we can increase deal flow and he can just focus on cranking out the work.

We have a deal under contract.  We've discussed how to structure our partnership conceptually, but now that we've got a deal it's time to iron out all the details and write a formal Operating Agreement with an attorney.  Please review the below initial ideas below, and of course feedback and advice would be appreciated!

• 50/50 split - we each fund the business with an equal amount of cash
• I handle marketing, evaluating and finding deals, offers, financing, bookkeeping, taxes, legal and admin
• He handles everything hands-on: initial rehab and (if it's a BRRRR) finding tenants, maintenance, collecting rent, evicting tenants if needed, etc.
• We are starting to talk about fee structure for the major items of the deal.
  • 5-10% (of rehab cost) project management fee for rehab - would go to him
  • 3-5% (of purchase price) acquisition & setup fee for each new acquisition - would go to me
  • 8% of rent collected would go to him for hands on aspect of PM
  • 2% of rent collected would go to me for managing bookkeeping, taxes, legal, and admin
• After paying fees we would split the remainder cash flow and equity 50/50
• We can each take owner distributions at our discretion but need to maintain a minimum cash reserves (say, $10k per property)
• Exit strategy: we have talked about outlining a few options for exiting the partnership.  One would obviously be to liquidate properties.  Another would be different buyout options.  So let's say the business has $1M in equity in 10 years, one of us could buy the other out for $500k.  If we don't have that cash on hand, then we could work out a note where the $500k is payed out monthly with interest over the course of 10 years or so.