re: LLC Partnership 2 couples

[Anthony M.]

Hello, We really need some advice here, We have 17 years of Rehabbing experience, of fixing and flipping " Residential single family houses. Always Did our own work" and had Rental units, until the Crash.......

Question is, we had some people which stepped up to join with us if interested to form a LLC Partnership, We decided to do it, they buy the Property, and are Silent Partners hands off everything, we Handle everything day to day, do the work and Split the profits, 50/50 which we agreed, we just finished our 2nd house and sold it, closed , and ready to move forward to the next, however, in the middle of the 2nd house, they brought us a paper, kind of an operating statement of responsibilities, the 1st house we split about 40,000 and we were told on this second one, that they have to collect interest on them loaning the LLC. money to purchase the property, we thought that this was just a formality,and they would then have to put money back in, "on paper" which would be for the purpose of the IRS, but we were told, that's the way the Book keeper said it had to be structured, so the project took longer than expected, to finish and sell...........but they have been instructed to treat these houses as inventory, new for us, as we never had partners before, short story long,

We only ended up clearing a 13,500 profit, but turns out the interest was really going to go to them, along with a 50/50 split, so almost 10,000 dollars in interest, plus we split the remaining 3500, so we didn't do that well. obviously, is it ever customary for private money investor, to get a chunk of interest and 50% of the profits, I was not aware of it actually going to them, as real interest, since they receive 50% of profits as well, I feel like we must be the biggest fools, and duped, has anyone ever tried to pull this off? I would think it's either interest or profit split "BUT NOT BOTH"

Am I wrong or Naive???