How should I structure business for my first flip?

[Jake Silcott]

Hi everyone, I have a question about a simple deal structure for a fix n flip. A family member has agreed to fund a flip for myself and another partner. We will split the profits equally 3 ways. We will use my LLC as the business entity and the funds will come from a HELOC. I am the only member of the LLC.

How should a deal like this be structured and how should the profits be distributed? Should I have the LLC borrow the funds from the family member and secure it with a promissory note and deed? The LLC could then pay the loan back with a profit share after we sell.

Or...do I need to have a JV agreement between the 3 of us? Or both?

What about my other partner? Do I need to 1099 him when I pay him his share of the profit? I will of course consult my tax advisor and attorney, but I'd like to hear all your thoughts as well.

Any insight on how to best work this is much appreciated. This is my first deal. We close on it in a couple weeks and I'm fired up!!

Thanks a bunch!!

[Steven Hamilton II]

Originally posted by @Jake Silcott:

Yes, that makes sense. Thanks Steven.

Can anyone suggest a way to make it work well without forming a new entity? I'd rather just use the one I already have if possible.

A simple JV agreement and fill out a partnership return. Your LLC can be a member. The income and Expenses and property belong to the partnership and the net profit is passed through to each of the three partners.