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MenuHow should my real estate partners and I calculate each of our profits?
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This is a prime example of why "stock template" operating agreements are not always the best. They don't always cover every situation and can sometimes lead to confusion. It is best to have specific language on the Operating Agreement that discusses exits, sales, and division of assets. With no other information to go on Scenario one is probably the way a business adviser would interpret the situation. The best action is to consult an contracts lawyer.
I hold two accounting degrees (frankly from more than a little while ago). That said, this isnt accounting advice, nor is it tax advice, nor legal advice. I have done hundreds of real estate deals, ranging from deals just like this one (two partners owning a house) to large commercial transactions. There are as many ways to calculate profit sharing as can be imagined, and almost all of these ways can either be argued or have some precedent. What appears to me to be happening here is that one partner is hoping to get more of the proceeds than the original agreement called for. The more salient question, in my view, is how would a court look at this circumstance, and again, while this is not legal advice, I do have sufficient experience to say that most likely a court would respect the original 55/45 agreement as it was agreed to by the partners. That is much more dispositive of the sharing question than the accounting method. If you would like to discuss this further I am available. Good luck.
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