TLDR How should a colleague and I structure my initial deal as a partner in a small business that he started on his own?
I have been asked by a colleague to partner with him going forward in a small commercial development business that he is looking to scale. The idea is that we eventually grow this in a way that allows us to leave our current careers and operate a successful development company with assets in multiple markets across Texas. However, I am struggling with where to begin the conversation of how this partnership will be structured.
He is currently in the final phase of his only development which is in the debt/equity sourcing stage for construction. The land has already been paid for from the previous phases, construction drawings are 75% complete and a GC has provided a budget. I share this to give you an idea of the fact that this business was his idea, he took the initial risk on the development and has been successful thus far.
I am getting involved quickly in meetings/calls with lenders, potential equity partners, etc., but I want to be realistic and fair in the sense that most of the risk and leg work setting up this final phase has already been done by my partner while I would anticipate managing the contracts, buildout, lease/sale.
TexAgs experts…does anyone have thoughts on how my involvement in the final phase could be structured (i.e. equity w/ pref + % of profit + development fee or other) and then again for how the future deals should look if we are ultimately planning to be more equal partners in this business?
I have been asked by a colleague to partner with him going forward in a small commercial development business that he is looking to scale. The idea is that we eventually grow this in a way that allows us to leave our current careers and operate a successful development company with assets in multiple markets across Texas. However, I am struggling with where to begin the conversation of how this partnership will be structured.
He is currently in the final phase of his only development which is in the debt/equity sourcing stage for construction. The land has already been paid for from the previous phases, construction drawings are 75% complete and a GC has provided a budget. I share this to give you an idea of the fact that this business was his idea, he took the initial risk on the development and has been successful thus far.
I am getting involved quickly in meetings/calls with lenders, potential equity partners, etc., but I want to be realistic and fair in the sense that most of the risk and leg work setting up this final phase has already been done by my partner while I would anticipate managing the contracts, buildout, lease/sale.
TexAgs experts…does anyone have thoughts on how my involvement in the final phase could be structured (i.e. equity w/ pref + % of profit + development fee or other) and then again for how the future deals should look if we are ultimately planning to be more equal partners in this business?