How to structure a partnership.

[Robin Castillo]

Hi all, starting out and partnering with my two long life friends. Trying to figure out how to structure a partnership, how to split profit but mainly how to finance and share tax benefits. We will be buying small multi family and forming an LLC so if anyone is on the same boat I would appreciate your input, thank you!

[Ashish Acharya]

@Robin Castillo You're making a great move by planning your partnership structure early—it’ll save a lot of confusion and potential issues down the road. Since you’re teaming up with two lifelong friends, it’s essential to formalize everything even if there’s strong trust.

Start by forming a multi-member LLC in the state where you'll invest. This offers liability protection and sets a clear legal and tax foundation. You'll need an operating agreement that outlines ownership percentages (which can be based on capital, credit, or effort), how decisions are made, each partner's role, and what happens if someone exits the partnership.

When it comes to financing and profit splits:

• You can split everything equally if all three of you contribute the same.
• If one partner puts in more money or signs on the loan, you might offer them a preferred return or a larger equity share before dividing remaining profits.

On the tax side, the LLC is a pass-through entity, so each of you will receive a Schedule K-1 reflecting your share of income, expenses, and depreciation. Typically, these tax benefits—including any bonus depreciation—are split according to ownership, unless your agreement states otherwise. If one of you qualifies as a Real Estate Professional, they may be able to use the rental losses to offset their active income.

Loop in a real estate-focused CPA early to ensure your structure supports long-term tax efficiency, clean bookkeeping, and proper allocation of benefits. A solid legal and tax foundation now will protect your friendship and help your investment partnership scale smoothly. If you want a sample LLC operating document, please let us know.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.