Partnership Agreement, Fico for credit line, Commercial RE

[Hugh O'Neale]

A CPA friend and I want to form a limited partnership. He has a great credit score and offers it for me to acquire an unsecured Line of Credit that I will use for earnest money deposit and soft costs associated with the purchase of performing recession-proof commercial real estate. We are drawing up very clear terms for an agreement that discusses the different outcomes and aspects of the relationship: Who is responsible for what? When and how often to get paid? What is the exit strategy? All of that. I offered my friend a percentage of the rental income for the duration of the LOC before it is reviewed for an increase, in exchange for our use of his Fico score. His involvement, really, is help to acquire the LOC; I'm bringing the hustle and the deal in the relationship. All I need is his credential and the ability to give him a return on that investment. The purchase money is green-lit from another source. On the surface, my friend is not bringing any capital per se. But, his FICO used to acquire the LOC which pays expenses essential to complete the transaction is a significant contribution; equivalent in value to the consumed amount of the credit line. Effectively, we were presuming with this plan that the CPA would be an Equity-Based Money Partner, and that we would split the net profit.

My concerns are, Would this offer to my friend be considered a security by the SEC? And should we be following the Reg D exemption rules to cover ourselves if there is a loss of funds? Neither of us is an accredited investor. I want to simplify reporting and compliance. To that end, I wonder if its better to treat my friend, instead, as a private investor receiving a percentage return; or to structure the partnership as a short-term loan. Can we use a promissory note? Through the use of his Fico to acquire the LOC, he provides temporary short-term funding for costs related to a purchase. May I pay him a premium and repay the credit line balance? Can we cap his potential losses in the partnership agreement?

Please ask questions if readers need more clarifying information.  And, thank you for your attention; much appreciated.