Creation of a shareholder agreement that outlines how income is to be distributed? 

Default if there is more than one LLC Member.S-corporation: Reports on Form 1120S which issues a K-1 to each shareholder to report on their personal 1040.

If working for someone else you must be at least 5% shareholder.

It becomes a security (another unnecessarily scary word) when you have one or more investors, members, share holders, or limited partners who's only contribution is financial and you assume all management decisions for their money.

That is like saying each time Apple loses a products liability law suit, the shareholders must personally pay out their bank accounts to the plaintiff.

The ROBS program requires an active business into which the retirement plan can become a shareholder.  

An obvious one would be when terms/rate to acquire are extremely attractive, on syndication where you are the minority shareholder, you can add good value after purchase, or you expect massive market appreciation in order to refinance shortly after purchase (as Michael mentioned above.)

They are supposedly making these deals work for their shareholders - who they are paying a 5.8% dividend - where we would be one flat roof away from hardship buying at those prices.If I am not trying to make the margins needed for syndication, I should have more buffer space, should I not?  

We look to the economic substance of the transaction, and in the case of rental properties, the income/loss will be passive in nature.UNLESS: the shareholder of the entity qualifies as a real estate professional for tax purposes.

Don't pierce the corporate Veil: This can occur if the entity either is poorly capitalized.Inadequate Initial funding of the entityor fails to maintain a separate identity from its owners ( using the business bank account for business purchases, maintaining separate books)Conversion of entities Assets for Personal Benefit:Another factor that poses a risk of piercing the corporate veil is the draining of entities assets (such as payments of large salaries to shareholder-employees) that leaves the entity with inadequate resources to pay its debts.Do not commingle personal and LLC assets.Maintain a separate LLC bank account.Execute an operating agreement.Follow the provisions of an operating agreement.Have LLC member meetings according to the operating agreement.Title property in the name of the LLC.Maintain insurance on LLC property in the LLC's name.Sign all LLC documents in the LLC's name, not the members' names.These steps will also provide a better defense against other creditors attempting to show you pierced the corporate veil.So,  put the money in the LLC's Book as capital contributions from your partner, and use the moeny for the transaction.Also, although I do not know the extent of the business you have conducted so far or will in future, you should consider electing S-corp.