Forming a partnership

[Vincent Salazar]

Hello,

I am in the process of forming a partnership with my Realtor friend, to flip my first house.  I just had some questions if anyone has similar experience with my situation.

The deal we have in place so far is, she will be the agent and provide insight in the house we choose. She has more experience in this, however is still pretty new herself. I am creating an LLC in order to secure funding for our deal, and we will be splitting other associated costs that come along (i.e. for rehab). She will also be offering her networking, and I will be as much involved as I can, so that I may learn the process better. As of now, we both are friendly, with same goals, and work well together.

My question is, what is the best partnership agreement we should form?  I looked into websites like, LawDepot.com, that offer a simple drawn up Joint Venture Agreement.  I was then going to have a Lawyer review and tweak what they seemed fit.  Is this a good idea?

Also, should I insist on 50/50 split of costs?  I was thinking of just tracking all expenses (hers or mine) and using profits to pay all expenses, and then splitting profits 50/50.  That way, we won't have to worry about waiting on other persons funds, and instead, pick and choose what each of us can pay for and settle up at the end.  How does that sound?

I want to keep in mind, that I am not trying to get rich quick here.  My ultimate goal is to learn as much as I can, so I can be better for the next one.  I'd like to one day be more independent in these ventures.

Thank you for your time and input, and appreciate any words of wisdom

-Vince

[Will Barnard]

My best advice is to not go at it alone and try to do it yourself when it comes to the partnership agreement. An attorney or entity formation person should draft said operating agreement (if LLC) or partnership agreement if you use an S Corp. There are many things to consider in a partnership, not just who gets what percentage of profits and costs and what each person's responsibilities are. You have to also consider the what if's like if partner A dies, what happens?

If you both put equal money in and equal work load, then that makes the 50%/50% fair. Once you have the entity, you both put same money into the new entity's new bank account. Any costs before that can be easily tallied up and then inputted into the entity accounting books like Quickbooks or whatever you choose.