Fail to produce K-1s in time for LP tax returns to completed on time, refuse to communicate with LPs, when LPs start to express frustration.Cheryl Cheryl, I'm sorry to hear this.Many investors learn expensive lessons with their early investments.Knowing nothing about this deal (because I didn't invest) I can already tell you the 24% projected return was a major red flag (in my opinion).

Companies like DL Cabinetry and J&K Cabinetry ship RTA cabinets nationwide for a fraction of the cost of Kitchen and Bath companies.

If you go with the partnership route1) You need to manage the money going in and out of the business bank account.2) File a partnership return and be responsible for issuing K-1's3) make distributions to you and your partner for cash flow that you receiveYou will likely spend many hours on a nice gesture.I may want to consider instead to give a christmas gift or a bonus for early completion of projects.

Lastly funding developer who has 3 subdivisions going in WA DC market. these are big time deals and with our funds for the soft costs  500 k to 1 mil on each project my client is going to make  sit down  but probably over 10 million net  life changing money and well we will do good too !!

@John K. : @Chris Seveney has a really good  point. 

Quote from @Michael K Gallagher: Quote from @A Rao: I invest in land and have done entitlement/zoning and other DD work successfully for years.A broker called me this morning on a property I have on a busy interesection and has a QSR client who likes the location, but does not want to do a ground lease, only a build to suit. 

Syndication Reporting IssuesMissing Form 8918 for reportable transactionsInconsistent investor disclosuresRequired registrations skippedWhat Doesn't Actually Matter:(Despite What Your Uncle's CPA Says)Special AllocationsNormal promote structuresStandard waterfall provisionsTypical developer promotesReality: Unless extremely aggressive, IRS rarely caresTechnical DocumentationMinor §704(b) gapsCapital account glitchesTechnical allocation languageTruth: Unless hiding something biggerProperty Value AllocationsNormal basis step-upsTypical appreciation splitsStandard promote calculationsReal World Example:🏢 100-unit apartment complex4 partners, $5M dealDeveloper promote structure= Zero IRS interestSame Deal With Red Flags:🏢 100-unit apartment complexHidden partner arrangementsArtificial loss allocationsUnreported debt shifts= IRS AttentionPractical Protection Steps:Basic Documentation✅ Clean operating agreement✅ Economic substance✅ Partner contributions tracked(Don't need War & Peace complexity)Economic Reality✅ Allocations match economics✅ Real money movement✅ Actual partner participationClean Reporting✅ Consistent K-1s✅ Required forms filed✅ Clear communicationThe "Sleep Well" Test:Can you explain your structure to an IRS agent without sweating?

I could come up with a down payment for an investment property in a different state easier than my home state at prices are pretty high in the 300-400 k just for townhomes.

@Jim K.

Subchapter K is an entire area of the tax code.