Partnership agreement nuances

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Partnership agreement nuances

Ryan Kraemer
Real Estate Agent · Member since 2018 · 8 posts · 2 votes

Hello!

I am looking to enter into a medium sized multifamily deal with a total of 4 partners. An attorney will be used to draw up the legal documents and I have a list of stipulations that are to be proposed/entered into. I am looking to see if anyone has any advice in regards to the terms that should be put into the business agreement when there are 4 partners involved. A few things that have been discussed are:

-Ownership percentages per investor

-At what point in the future a refi will be done and at that point if a member wants to be bought out, they can be bought out at the appraised value. 

-After that refi I was thinking every 2-3 years a partner could ask to be bought out and if no one member wants to buy them out then the can forcefully sell their share of the business to the other partners.

A few questions that I have for everyone here;

-What amount of insurance would be appropriate for the business and should I also have an umbrella policy for myself?

-Any recommendations on how money should be handled as far as paying anyone that does work on the property as well as how/when profits are paid out?

If anyone has any thoughts I would love to hear them! Thank you!

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y
    Quote from @Ryan Kraemer:

    Hello!

    I am looking to enter into a medium sized multifamily deal with a total of 4 partners. An attorney will be used to draw up the legal documents and I have a list of stipulations that are to be proposed/entered into. I am looking to see if anyone has any advice in regards to the terms that should be put into the business agreement when there are 4 partners involved. A few things that have been discussed are:

    -Ownership percentages per investor

    -At what point in the future a refi will be done and at that point if a member wants to be bought out, they can be bought out at the appraised value. 

    -After that refi I was thinking every 2-3 years a partner could ask to be bought out and if no one member wants to buy them out then the can forcefully sell their share of the business to the other partners.

    A few questions that I have for everyone here;

    -What amount of insurance would be appropriate for the business and should I also have an umbrella policy for myself?

    -Any recommendations on how money should be handled as far as paying anyone that does work on the property as well as how/when profits are paid out?

    If anyone has any thoughts I would love to hear them! Thank you!


     1. Ownership percentages

    2. Cash Call requirements and what happens if someone does not add cash

    3. What happens if someone dies

    4. Selling interest first to owners then 3rd party

    5. How is value of company decided

    6. How is voting handled with 4 people?

    7. How are distributions shared?

    8. If someone does work NEVER ever include it as equity, pay fair market price to them and if they want to invest it in business go ahead.

    9. Positions of the company and who does what

    These are some, there are a lot more, think of every situation where something goes wrong, such as someone gets divorced and wife wants 1/2 etc. When things are great you do not think you know what will hit the fan, but if it does, better to have it outlined what happens

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  • Ryan Kraemer
    OP
    Real Estate Agent · Member since 2018 · 8 posts · 2 votes
    3y
    Quote from @Chris Seveney:
    Quote from @Ryan Kraemer:

    Hello!

    I am looking to enter into a medium sized multifamily deal with a total of 4 partners. An attorney will be used to draw up the legal documents and I have a list of stipulations that are to be proposed/entered into. I am looking to see if anyone has any advice in regards to the terms that should be put into the business agreement when there are 4 partners involved. A few things that have been discussed are:

    -Ownership percentages per investor

    -At what point in the future a refi will be done and at that point if a member wants to be bought out, they can be bought out at the appraised value. 

    -After that refi I was thinking every 2-3 years a partner could ask to be bought out and if no one member wants to buy them out then the can forcefully sell their share of the business to the other partners.

    A few questions that I have for everyone here;

    -What amount of insurance would be appropriate for the business and should I also have an umbrella policy for myself?

    -Any recommendations on how money should be handled as far as paying anyone that does work on the property as well as how/when profits are paid out?

    If anyone has any thoughts I would love to hear them! Thank you!


     1. Ownership percentages

    2. Cash Call requirements and what happens if someone does not add cash

    3. What happens if someone dies

    4. Selling interest first to owners then 3rd party

    5. How is value of company decided

    6. How is voting handled with 4 people?

    7. How are distributions shared?

    8. If someone does work NEVER ever include it as equity, pay fair market price to them and if they want to invest it in business go ahead.

    9. Positions of the company and who does what

    These are some, there are a lot more, think of every situation where something goes wrong, such as someone gets divorced and wife wants 1/2 etc. When things are great you do not think you know what will hit the fan, but if it does, better to have it outlined what happens


     Awesome! Thank you very much for your help!

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