How To Structure A 3-Man Partnership

[Steven Hutzley]

As the title suggests, me and two others are looking to buy our first investment property. We are looking for advice/discussion on the best way to structure the deal. Our concerns are with financing, liability, and tax implications for each option of

1) forming an LLC with three governing persons. 

2) conventional loan with one person on the mortgage, but expense/profits split 3 ways,

3) partnership with the 3 of us guaranteeing the loan.

We are in Texas. Each of us hold our own mortgages for primary residences. We would also be interested in any other options or advice on the matter.

[Linda Weygant]

I have two LLCs which each have 4 members each.  The bank was fine with only one person guaranteeing the mortgage.  

Be careful with 3 governing people.  My LLCs are set up with one Managing Member who has authority to sign checks, make purchases, apply for credit, deal with the tenants and essentially run the business.  The other 3 people have equal voting rights and can strip the Managing Member of their authority at any point, but they do not have debit cards or access to the checkbook.  They certainly don't talk to the tenants.  

Too many cooks really can spoil the broth. With multiple people out spending money and otherwise obligating the LLC to debt or specific performance, you can have a huge mess very quickly.

My .02.  Your mileage may vary.