Joint Venture Organizational Chart (Real Estate Transaction) (50/50 Joint Venture)

Summary

This chart depicts a real estate joint venture where two members make equal initial capital contributions to the joint venture. A 50%/50% split is not uncommon where both members have sufficient capital and want to share control. Some other formulations are 95%/5% or 90%/10%, where one party contributes a small part (5%–10%) of the equity capital and the other member provides most of the equity capital and has key decision-making power. In the structure depicted below, the two members form a new limited liability company (LLC) and enter into the operating agreement setting forth their rights and obligations. Often, the joint venture will form a wholly owned subsidiary company which then owns the property. This structure is typically used when the parties anticipate obtaining third-party financing since lenders often require a bankruptcy-remote special-purpose LLC to hold title to the property. Since the subsidiary company holds title to the property, the management agreement governing ...