Best things to have in a partner agreement

[Leland S.]

I'm starting a joint venture with someone where I will be the primary investor on a house flip. I haven't done this before so obviously I want to be protected legally since it's someone I just have met (on here).  There is potential to do more deals - at least I hope this ends up being profitable and we can continue doing this. The property is in greater Phoenix Arizona and we are both residents here.

Some questions I had (for both tax and liability benefits):

• Should I operate out of my own LLC (as far as dispersing the funds and signing agreements)?
• Should we start a partnership? 
• Should I use the partners LLC for the title, or only if I am listed as a partner?
• Who should hold the title?
• How do I ensure my investment is insured by the property? (holding the title I presume)

Inputs are appreciated!

[Wes Blackwell]

@Leland S.

If you're the primary investor, perhaps you may want to look into private money lending rather than partnering on a deal. Just a suggestion.

But, what you really need to determine is who is responsible for what, who is in control and has the final decision, and what happens if things go wrong.

For example, if you're both on title to the property, you'll both be required to sign off to sell the property, and if there's some disagreement about list price or whatever, it could be a major headache if your partner doesn't agree with you and makes the sale difficult.

If you're a little wary or unsure of your partner, put yourself in a position to have as much control as possible over the project. For example, if you're the money and he's the contractor, you could put the title to the property in your name only, and then hire him as a contractor and sign a separate agreement with him to pay him half the proceeds from the sale or something like that. 

If it's someone you have just met on here, do you have references for them? Have they done deals with other investors before? That may help ease your concerns...

I would recommend doing a basic google search for partnership agreements and just read through them to see all the topics that are covered...

https://www.lawdepot.com/contracts/partnership-agr...

Who's contributing capital, how / when is it withdrawn, financial decisions, etc.

And of course, discuss ALL of this prior to signing anything. If they are untrustworthy you'll probably find out pretty quickly.