Making Partnerships Work
Today I wanted to share my insights after over 20 years of various partnerships that I’ve been involved with. While working with one or more partners is not for everyone, I find that it helps to keep me motivated, encouraged and on track towards reaching my goals.
For example, over two years ago I was struggling a bit after buying out my last partner several years before. The market had changed and I was stuck trying to make the old methods of putting commercial real estate deals together… mostly without much success!
Then I met my current partner, Jerry Norton. He’s younger and newer than me so it’s harder for him to get stuck doing things "Because that’s the way we’ve always done it."
Jerry was lining up investors to provide private funding for his commercial real estate deals so that he had the funds on hand to make serious offers on distressed or commercial workout deals. I liked what he was doing so we used a simple method of starting into a potential partnership.
Doing a Trial Project to Test Out a Potential Partnership
We picked a few opportunities that we could work on together, defined the roles we would play and then moved ahead WITHOUT creating an official partnership or LLC. Instead we created a simple contractor’s agreement that:
- Defined what each of us would contribute
- Clearly stated how and when profits would be split
- Gave each of us the ability to cancel the project with 30 days notice
So one of us ran and retained 100% ownership of the LLC. The other "partner" made
contributions as in independent contractor with compensation defined by a simple contractor’sagreement. This allowed us to get to know each other, see how the other worked and responded to day to day issues, and get more comfortable with each other BEFORE we ever took the next step of creating an "official" partnership together.
I hope that you are finding ways to adapt to all the changes in the commercial real estate marketplace and that you find these tips helpful to your business.
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