Looking out for brothers money BUT...

[Miguel Sinclair]

Here's the situation and I need advice to bring to the table within the next few days. Myself, my brother and my father in-law have decided to form an LLC and flip houses. why? I have a full time job but a lot of free time, adn can manage the company and every project . My father in law is a contractor will all the resources and can do work at cost and my brother has 500k to invest. Initially I was intimated, not feeling I was contributing much, but quickly realizing this would never materialize without my time and work. Fast forward we're closing on a house. Since we have the cash, the closing process is much more straight forward and we avoid a lot of bs. Quick fast and convenient. Here's my issue I'm facing. My brother last minute, is having a change of heart in dumping 300 k into the business and instead, is looking into having our LLC, of which we are all equal partners, take a loan out or mortgage from his personal account, to then repay. What are the complications, legal ramifications, additional expenses, pros cons, of instead of dumping money straight in, having a partner make the LLC take out the loan. He is claiming he wants to create a barrier between his investment, but we have several types of insurances for this. Not to mention, if he is essentially going to become the bank, why not simply take out a loan from a bank, and pay them back, sure at a higher rate but NOT having to split the profits... Please advise, I apologize for my lack of knowledge this is new to me. I want to protect his money, but not at the complication and additional expense... What's the play here?

[Will Barnard]

It is my considered opinion that the money portion is worth much more than 33.3%. That said, if structure us the issue here, your brother can be both lender and partner, just lender, or just partner with a higher split to him.  If I was in the brother position, I would be looking for 50% with the other two partners getting 25% respectively.

In the partner And lender scenario, your brother simply gets a deed of trust recorded against the property with a set interest rate and terms. He also gets the partnership split of profits, after all costs are paid.