Advice on contracts for a flipping partnership

[Mo Farraj]

Hi BP community,

I have a deal I am looking to partner in with an investor I met at a networking event. This investor has done a few flips before but this is my first one. The deal requires me to put down about 60k in cash, I want to make sure I am covered on all basis - can anyone advise me on the contracts I should have a lawyer review? The money will be put in Escrow but what else should I do to ensure my back is covered and this investor doesn’t run off with my money?

Thank you in advance.

Thanks,

Mo

[Eamonn McElroy]

@Mo Farraj

You should have your attorney draft a "partnership agreement" that takes into consideration state law in your jurisdiction.

Depending on the amount of profit you're expecting and/or the amount of deals you intend to do with this individual, you may want to ask your CPA and attorney about forming an LLC and writing yourself into the operating agreement as the "functional equivalent of a limited partner."

Ideally you'll be consulting both a business attorney and a tax CPA/EA to get both sides of the coin before any actions are taken.  Tax planning is a lot easier to do prospectively than retrospectively...