When looking for GP/Partnerships

Question

Hello everyone, I would like input from others when forming a partnership. I have a partnership breakdown calculator, but your help would understanding more would be greatly appreciated.

A few things I’d want to work through upfront:

• Actual responsibilities: Who handles financing, contractors, property management oversight, reporting, and unexpected problems?
• Evidence of experience: What have they personally done, and what would former partners say about working with them when things got difficult?
• Financial expectations: How much cash stays in reserve, and what happens if more money is needed?
• Decisions and accountability: Who has authority, how are disagreements resolved, and what happens if someone stops doing their part?
• Exit plans: What if one person needs their money back years before the other?

Actual responsibilities: Who handles financing, contractors, property management oversight, reporting, and unexpected problems?

Evidence of experience: What have they personally done, and what would former partners say about working with them when things got difficult?

Financial expectations: How much cash stays in reserve, and what happens if more money is needed?

Decisions and accountability: Who has authority, how are disagreements resolved, and what happens if someone stops doing their part?

Exit plans: What if one person needs their money back years before the other?

What is one thing you would always verify or agree to in writing—and what experience taught you to ask?

Ashish Acharya · Answer

Joseph, you’re already asking the questions that can save a lot of headaches later. I’d add one more category to the list: how the partnership will handle the tax side when the economics don’t line up perfectly with the cash.

For example, I’d agree upfront on how profits and losses are allocated, how depreciation is handled, what happens when one partner contributes additional capital, and whether the partnership will make tax distributions so nobody ends up paying tax on income they didn’t actually receive in cash.

I’d also be careful about assuming that a 50/50 ownership split means everything has to be 50/50. If one partner is bringing more capital, guaranteeing debt, sourcing the deal, or handling the management, those contributions should be reflected in the overall economics.

I’d have the CPA and attorney review the structure before the first property is purchased. It’s much easier to agree on these things when everyone is getting along than when there’s already money involved.

Feel free to DM me, I’d be happy to send over a few resources that might be helpful.

Kasing Ng · Answer

Hi Joseph, Chris nailed it, get it all in writing while everyone's still getting along. Let me add the one thing I always push people to pin down.

Write down two separate things: how you split the profit and loss on paper, and how you split the actual cash. Everyone assumes owning half the deal means half of everything. It doesn't have to. In real estate, the depreciation write-off is the big early tax perk, and you're allowed to hand more of it to whichever partner can actually use it. If your agreement is fuzzy on this, the IRS can throw out your split and redo it their own way, and suddenly the deal isn't the one you shook hands on. And on your exit question: when one partner buys the other out, that's a taxable event, not just a check. The part that came from all those years of depreciation gets taxed as regular income, not the lower rate, and the person getting bought out almost never sees it coming. So decide now how a buyout gets priced and who covers that tax.

Chris Seveney · Answer

You need to get all of these things in writing. It's best to negotiate everything up front when it is "a happy marriage" versus waiting till there is a dispute in a partnership and something was not dealt with. It will lead to challenges, which lead to legal costs when things go bad

When looking for GP/Partnerships

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