Hello,
I have a client that came looking for advice on structuring a real estate deal and I figure that many of the members on this forum have some helpful insights.
Partner A will invest 95%, Partner B will invest 5%.
As far as work/responsibility, Partner A will handle all the admin, getting an LLC setup, obtaining insurance and other office work. Partner B will handle the physical work of renovating the property and coordinating with contractors/architects.
The issue is how to structure the P&L split. There is a large disparity in the capital contributions and they will both be working, though it is likely that Partner B will spend more time on the project than Partner A. Perhaps 60% of all hours will be spent by Partner B and 40% by partner A.
It would be simpler if one partner was doing all the work and the other was investing all the capital but that is not the case.
One idea I proposed was for Partner A to take 90% and Partner B to take 10% as compensation for the additional time. However, the concern is that the stake is still too low for Partner B to have a meaningful stake in, and therefore sufficient motivation for the project.
Thank you.