How to combine funds with Partner

Question

Hello everyone,

I have a question about how combined funds must be managed in order to purchase a property with a partner.

A friend and I would like to combine our funds to purchase an investment property.  We will sign an agreement and I have no concern about the partnership or the terms, I am simply wondering about the technical requirements of the literal procedure for combining funds for the purchase.  How must we manage the funds?  (For example, the easiest method I can think of, is it acceptable that one of the partners write a check which is commingled with the funds in the other  partners checking account, or would that count as taxable income for the receiving partner, or entail other pitfalls.)

Any input is appreciated.  Thanks in advance.

Evan Anderson · Answer

Thanks Ian.

Here is a follow up question.  In this case, my partner would like to keep his name off the property, so it would be in my name only, if we put both our names on the account would the property need to be held in both our names as well?

Another related question comes to mind.  Can this be transacted as a private loan, whose terms are tied to the property?  i.e. rather than paying interest the loan would pay back based on the proceeds from the sale of the property?

Ian Olmsted · Answer

Open a business checking account and pool money in that account.  Either put both of your names on the account or form a company and open the account under the company name.