Splitting Equity with a Business Partner

[Justine Phillipson]

Hello, 

I am a Real Estate Agent planning on doing my first flip in 2024! I have a friend, who is a licensed GC who wants to go in on the deal with me. I will be finding the deal, fully financing the deal, handle the listing and do a little bit of help with the rehab.  My business partner will do most of the rehab in exchange for equity in the deal. 

I guess I have two questions: 

1) Would we want to open an LLC together? Or should I use my own LLC and he uses his separate LLC for the deal?

2) What is the typical equity split for something like this? I'm thinking that he will get paid for materials and labor, and then also get a percentage of the profit. But I honestly am not sure what the typical split looks like! 

Any other tips or advice would be appreciated! Thank you!

[Taylor L.]

I would wonder about the alignment of interests in this deal. It sounds like you're taking all of the risk and he gets paid either way, whether the deal makes or loses money. Equity (and thus share of profits) should be commensurate with contribution to the deal and exposure to risk.