Either your income is derived from 1099 or it's not.

Near the end of the deal when I have a buyer, how should I go about making sure the money is properly distributed legally?

Walmart is building a meat distribution center and Panasonic just broke ground on an electric vehicle battery plant.

These "losses"  show up on the investors K-1's even when they are getting quarterly distributions. 

As with any excel UW model, repetition, repetition, repetition has also been a big help.https://www.udemy.com/user/justinkivel/He also has an advanced course that includes various stress tests, next buyer analysis, hold-sell analysis, CF distributions, Uneven waterfall CF, EM (Equity Multiple) waterfall hurdles, clawbacks, etc... 

in my personal work what we do is simply have them invest the funds into the LLC that is doing the work, secure it with a promissory note and a mortgage if desired, and then distribute the funds later (depending on the strategy) according to the agreement we struck.In my opinion it is important to treat the agreements with family and friends just like you would with any other private money partner (with whom you have a good level of trust). 

What a lot of people forget is that the 401K distribution can put them into the next bracket for federal tax brackets since the tax system is progressive.The other thing I find it that people miss is forgetting to calculate state taxes.The issue that you have is that the rental activity that you plan to do will likely be considered passive unless you can get it to be considered active.You can't offset passive losses with income type such as wages, interest and dividends.

In other words, use of criminal history as an automatic disqualifer had a disparate impact on people based on their race, color, or national origin.The thinking goes like this: In the past, it was felt that use and/or distribution of crack cocaine was a more serious crime than use and/or distribution of powder cocaine, as one example.  

IE: instead of saying maintenance is $200 / month, it uses a distribution, most months it's $0, while some months its $2000. 

For income tax purposes, a single member LLC is disregarded, so contributing or distributing cash would not cause any tax issues.