Here is a scenario:
Investor provides cash to buy house.
I buy house in my name with cash from investor.
I work on house with a partner to fix up the house and find subcontractors as needed.
When house sells investor gets money back plus profit.
Myself and partner split the rest of the cash.
Since the house was in my name how do I pay my investor and partner so that the IRS knows I should not be taxed on all of the profits?
You don't have to have an LLC. However; it may be more beneficial. You should talk to an attorney and accountant to find out the best way to set up your business. Hope for the best, and plan for the worst.
Your accountant can help with inputting those transactions so it reflects profit and expenses appropriately.
Hopefully you have a mortgage and note so the investor's money is backed by the asset and when you sell his mortgage is satisfied.
@Charissa B. You don't need to incorporate to allocate profits. You should speak with an attorney about drafting up an agreement between the parties involved detailing the profit and equity percentage splits and your accountant will prepare the tax returns accordingly.