I will hopefully be doing my first multifamily deal soon and am going to partner with someone I trust. He has the cash and I am bringing the deal. When we talked about potential profit splits, he said he could 1099 me and send me my half every month. I am worried about the tax implications of this. How do you typically handle disbursing money in a partnership?
Congrats on the first multi-family deal!
Distributions of cash by a partnership to a partner will be reported on a K-1 and not a 1099.
The partnership is responsible for providing a K-1 to each partner which reports to each partner his/her share of partnership income during the year.
Example - a partnership calculated ($1,000) of rental loss in 2017.
There are 2 partners with a 75% ownership and 25% ownership.
The partnership will provide a K-1 listing ($750) to partner 1 and ($250) to partner 2.
You may want to reach out to your accountant to look into filing the partnership return on your behalf.
Good answer from @Basit Siddiqi . Additionally, It's highly recommended to consult with an attorney in order to to create an operating agreement. Items such as contributions, ownership percentages, decision making, dispute resolution, distributions, and dissolution should all be covered in the agreement.