3-Way Partnership Structure

[Pat Griffith]

Looking for some advice on how others have structured a 3-way partnership. 

Partner 1 brings in deals and manages the business 

Partner 2 brings repair and renovation skills 

Partner 3 lives out of the area and brings capital 

What is a fair way to structure/put a value on the partners finding the deals and managing the business. Is it fair to expect the capital partner to bring in the down-payments since they wouldn't be bringing anything else to the partnership? 

[Drago Stanimirovic]

Hi Pat,

Structuring a 3-way partnership requires balancing the value each partner brings to the table. Partner 1, who sources deals and manages the business, should receive compensation that reflects the effort and responsibility they take on. This could be a share of the profits or equity, typically in the 20-30% range, depending on the complexity and the workload. Partner 2, providing repair and renovation skills, can be compensated either through being paid for their work or through a similar equity split, around 20-30%, while still reflecting the value of their expertise and labor.

Partner 3, who brings the capital, usually covers down payments and renovation costs, which justifies them receiving a larger share of the profits, often in the range of 40-50%. It’s fair for the capital partner to handle these financial contributions since they aren’t bringing management or hands-on skills.

Whatever structure you choose, make sure all contributions and profit-sharing are clearly outlined in a legal agreement to avoid any potential misunderstandings down the road. Ensuring that each partner feels their contribution is valued will lead to a stronger, more cohesive partnership.

Good luck,

Drago