Equity Sharing Agreement

ContractsCounsel has assisted 127 clients with equity sharing agreements and maintains a network of 99 business lawyers available daily. These lawyers collectively have 26 reviews to help you choose the best lawyer for your needs. Customers rate lawyers for equity sharing agreement matters 4.95.

An equity-sharing agreement is a legal contract that allows two or more parties to jointly own and share the equity of any property based in the United States. It helps buyers purchase the property independently despite having insufficient capital to invest in real estate deals. The equity sharing agreement involves two parties, the investor and the occupant, who contribute a specific amount of money towards purchasing properties. Let us learn more about the relevant aspects of this legal document below.

Steps to Apply for an Equity Sharing Agreement

An equity sharing agreement's application process involves a series of steps. These steps are often based on the specific nature of the legal agreement. The factors further include the parties involved and the purpose of the shared equity arrangement. Here is a general guide on how to apply for such an agreement:

1. Identify Potential Co-Owners. Identify individuals or entities interested in entering a shared equity arrangement. These could be family members, friends, business partners, or organizations willing to collaborate on a property investment.
2. Define Objectives and Terms. Clearly outline the objectives of the equity sharing agreement, such as homeownership, investment, or business purposes. Discuss and define key terms, including ownership percentages, financial contributions, and responsibilities.
3. Consult Legal and Financial Advisors. Seek advice from legal and financial professionals experienced in real estate transactions and shared equity agreements. They can provide valuable insights, ensure compliance with relevant laws, and help draft a comprehensive agreement.
4. Draft the Equity Sharing Agreement. Work with legal professionals to draft the equity-sharing agreement. The document should cover essential details, such as ownership structure, financial contributions, occupancy and management responsibilities, exit strategies, and other relevant terms.
5. Check Property Selection and Valuation. Identify the property subject to the equity sharing agreement. Conduct a thorough property valuation and agree on the fair market value or purchase price that will be used to determine each party's equity share.
6. Review and Finalize the Agreement. Review the drafted agreement with all parties involved. Make necessary revisions based on feedback, ensuring the document accurately reflects the agreed-upon terms. Once everyone agrees, finalize the equity-sharing agreement.
7. Sign and Execute the Agreement. Arrange for all parties to sign and execute the equity-sharing agreement. It may involve notarization or other legal formalities, depending on the jurisdiction.
8. Comply with Legal Requirements. Ensure the equity sharing agreement complies with all legal requirements, including property laws and regulations in the relevant jurisdiction. Legal professionals can assist in this process.
9. Implement Financial Contributions. Coordinate the financial contributions outlined in the agreement. It may involve providing the down payment, funding ongoing expenses, and managing financial responsibilities as per the agreed-upon terms.
10. Document and Keep Records. Maintain thorough documentation of the equity sharing agreement, including all signed copies, financial transactions, and any amendments or updates. Keeping accurate records is essential for transparency and future reference.

Standard Sections in an Equity Sharing Agreement

An equity-sharing agreement typically includes several vital sections to outline the co-ownership arrangement's rights, responsibilities, and terms. The most common sections often found in these agreements include:

• Introduction and Definitions: Provide a brief overview of the agreement. It further defines key terms used throughout the document. It helps ensure clarity as well as common understanding among the parties.
• Identification of the Property: Analyzes the particular property subject to the equity sharing agreement. It includes the specific address, legal description, and any other details relevant to the agreement.
• Ownership Structure: Defines the ownership percentages or shares held by each party. This section outlines how the equity in the property is divided among the co-owners.
• Financial Contributions: Details the financial contributions made by each party. It mainly focuses on the initial investment and down payment. It may also include any ongoing financial responsibilities. Examples include property taxes, insurance, and maintenance costs.
• Occupancy and Management: Outlines the rights and responsibilities of each party regarding the property, its occupancy, and usage. It is particularly relevant when one party is a financial contributor to the agreement. The other party is the occupier or manager.
• Appreciation and Depreciation: Specifies how the property's value changes will be shared among the co-owners. It may be either through appreciation or depreciation. This section may also address methods for property valuation.
• Exit Strategies: Describes the procedures and conditions for selling or transferring ownership interests. It may include details on the value of the property and the person with the right to first refusal. The exact process further involves buyouts.
• Dispute Resolution: Establishes different mechanisms to resolve disputes between co-owners. It involves outlining procedures for mediation, arbitration, or legal action if conflicts arise.
• Costs and Expenses: Outlines how the owners' ongoing costs and expenses related to the particular property get divided. It includes property taxes, insurance, maintenance, and other relevant expenses.
• Default and Remedies: Specifies the consequences of default, such as missed financial contributions or breaches of the agreement, and outlines remedies available to the non-defaulting party.
• Governing Law: Identifies the jurisdiction whose laws govern the agreement, providing a legal framework for interpreting and enforcing the terms.
• Miscellaneous Provisions: Covers miscellaneous clauses, including confidentiality, amendments to the agreement, and any other provisions deemed necessary for the specific circumstances.
• Insurance Responsibilities: Clearly defines the responsibilities of each party regarding property insurance, outlining whether co-owners are required to maintain homeowners insurance and how the costs will be distributed.
• Major Decision-Making: Addresses how important decisions related to the property, such as renovations or essential changes, will be made. This section may specify whether unanimous consent or a majority vote is required.
• Right of First Refusal: Outlines whether co-owners have the right of first refusal if one party decides to sell their equity share, providing existing co-owners the opportunity to purchase the departing party's share before it is offered to external buyers.
• Access and Entry Rights: Defines the rights of each party to access and enter the property, specifying under what circumstances entry is allowed and any notice requirements to be followed.
• Termination and Dissolution: Details the conditions under which the equity sharing agreement can be terminated or dissolved, specifying the steps to be taken and any potential consequences for co-owners.

Ryenne S.

Daniel R.

Michael S.

Bryan B.

Key Terms for Equity Sharing Agreements

• Equity Sharing Ratio: The predetermined percentage each party holds in an equity sharing agreement, indicating their ownership stake and potential returns.
• Occupancy Rights: The defined privileges and responsibilities outline who can reside in the shared property and how decisions regarding its use are made.
• Appreciation Sharing Formula: A specified method for distributing any property value increase among co-owners, often based on their agreed-upon equity sharing ratios.
• Buyout Option: A provision outlining the conditions and process by which one co-owner can buy out the equity share of another party, providing an exit strategy.
• Financial Contributions Schedule: A detailed plan specifying how ongoing expenses, such as property taxes and maintenance costs, will be shared among co-owners based on their equity-sharing percentages.

Final Thoughts on Equity Sharing Agreements

An equity-sharing agreement represents a flexible and collaborative approach to property ownership, offering a strategic solution for diverse financial objectives. This agreement provides a clear framework for co-owners to invest jointly in real estate by delineating ownership ratios, financial contributions, and exit strategies. The transparent allocation of rights and responsibilities, especially regarding occupancy and appreciation sharing, fosters a sense of fairness. However, the success of an equity-sharing arrangement relies on meticulous drafting, legal adherence, and ongoing communication among co-owners.

If you want free pricing proposals from vetted lawyers that are 60% less than typical law firms, Click here to get started. By comparing multiple proposals for free, you can save the time and stress of finding a quality lawyer for your business needs.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

Need help with an Equity Sharing Agreement?

Meet some of our Equity Sharing Agreement Lawyers

Thomas L.

Thomas L.

I am a Lawyer/CPA/Technology Startup Advisor/Executive with experience in global corporate law and finance, startup finance, accounting, technology, and business operations with a focus on startups of all kinds and non-profits. I have worked at a large international finance law firm, one of the Big Four Accounting firms, technology startups and non-profits. I help startups and non-profits get organized, get funded, and get going. I've seen all the mistakes made (often more than once), and so I can help you learn from, rather than repeat, history. I know all the insider rules, so you end up getting a fair start and a fair deal, rather than getting taken advantage of (whether an entrepreneur or an investor). My expertise includes: - organization of corporations | organizations of llcs | non-profits and dealing with the IRS - splitting equity | founder structure | founder equity | founder disputes - startup valuation | pitch decks and forecasts | raising capital | finding angel investors, accelerators and venture investors - SAFEs | convertible notes | preferred stock | restricted stock | stock options | 409A - Advisors - setting up cyber-secure business operations - trademarks | patents | intellectual property - employment law - cyber liability and ecommerce including privacy policies and terms of service - accounting and tax - litigation management References: https://www.upcounsel.com/profile/tjlovejr#reviews LION: LinkedIn Open Networker / connect with me at tlove@tjlovejr.com

Tabetha H.

Tabetha H.

I am a startup veteran with a demonstrated history of execution with companies from formation through growth stage and acquisition. A collaborative and data-driven manager, I love to build and lead successful teams, and enjoy working full-stack across all aspects of the business.

Max M.

Max M.

Results oriented business attorney focusing on the health care sector. Formerly worked in Biglaw doing large multi-million dollar mergers and acquisitions, financing, and outside corporate counsel. I brought my skillset to the small firm market, provide the highest level of professionalism and sophistication to smaller and startup companies.

Jimmy V.

Jimmy V.

I’m a semi-retired, long-time US attorney with substantial experience in business and corporate law. I counsel startups and small businesses, help them set up corporations or LLCs across the country and draft a variety of contracts and corporate documents.

Robert M.

Robert M.

Robert is a sixth-generation Tennessean and part of a long line of Tennessee attorneys: There has been a Marks attorney in Tennessee since 1856. In 1929, Robert’s great-grandfather established an event venue, Shadowbrook, which Robert has worked at his entire life, including managing for 10 years. He knows what business owners are dealing with—especially venue owners—because he has dealt with it. While Robert loves the hospitality industry, he pursued his passion. In 2016, Robert decided to attend law school and continue managing the business. He thrived. He was a founding member of the Nashville School of Law's Legal Aid Society, received the Tennessee Supreme Court’s Law Student for Justice award, and interned with the Tennessee Supreme Court's Access to Justice Commission. Before co-founding Mercury Legal Group, Robert focused on estate planning in solo practice. In this role, he helped clients protect what they had spent a lifetime building. Now he helps his clients build their businesses by providing tailored legal services.

Kandil O.

Kandil O.

A business law practitioner by passion, I take pride in the perfection of my contracting Skills. Every piece of information I gather and spin together transforms to a legally binding document, providing great legal protection for start-ups and leading to eventual growth. I am a natural in law and entrepreneurship, making for a perfect blend.

Moxie M.

Moxie M.

Lindsey has always been deeply invested in the power of knowledge; she was born and raised in Columbus, Ohio before making her way to Miami University for a dual Bachelor's degree. Afterward, Lindsey completed a Juris Doctor at Stetson University with an International Law concentration before earning a Health & Hospital law Certificate from Seton Hall School of Law. After graduating law school, Lindsey began her career as an associate at a Florida-based insurance litigation firm. She eventually transitioned to become a multi-year Rising Star in Employment Law by Super Lawyers as a labor and employment lawyer with Scott Wagner and Associates, supporting clients in Florida, California & Ohio with employment law matters. Her expertise covers counseling on workplace policies/handbooks; investigations into EEO discrimination/retaliation claims; wage disputes & wrongful terminations - equipping employees across multiple states for success in the ever-changing modern workforce landscape. Leveraging extensive knowledge of state/federal regulations gained from handling dozens of cases over many years, Lindsey has established herself as a leader in the field. Lindsey is a seasoned litigator, well-versed in the complexities of employer and employee disputes. She has represented clients on both sides during numerous mediations and provides an informed perspective when advocating for her clients' interests. She sharpened her dispute resolution skills by completing Harvard Law School's Negotiation Mediation course as part of their Executive Education Program as well as a Florida Circuit Civil Certified Mediator - making her qualified to mediate Circuit Civil cases in Florida as well as California and Ohio. Her breadth of knowledge provides valuable insight into the complexities each side faces while navigating their way through conflict mediation situations. With her varied expertise in the world of entertainment industry employment law, Lindsey has become a go-to source for Hollywood professionals, studios, and companies looking to make sure their legal considerations and entertainment contract law knowledge is up to date. From contract negotiations and employment advice to her outstanding knowledge of current regulations, she provides clients with everything they need for success both now and into the future. Lindsey dedicates her time and expertise to advancing the legal community. She proudly serves on the Executive Council for Florida Bar Association Labor and Employment Section, as well as with American Bar's Membership Outreach Committee in a leadership role. Lindsey is also an respected LA Magazine Editorial Board Member while Co-Chairing both LACBA CLE Event Dinner Committees - focusing on labor and employment law developments. Lindsey is passionate about providing accessible legal services to those in need. She serves on the Pro Bono Mediation Panel for the U.S Central District Court of California, volunteers as a mediator with California Lawyers for Arts and acts as Settlement Officer with Los Angeles Superior Court's ResolveLA program - all while donating her time towards resolving disputes through pro bono mediation at Equal Employment Opportunities Commission (EEOC). Lindsey is a globetrotter, an outdoor enthusiast, and dedicated sports fan all rolled into one. While splitting time between California, Florida and Ohio she has the best of three world - from hiking trails to family gatherings there's always something interesting on her horizon! Plus with photography as a hobby Lindsey enjoys capturing life’s precious moments so they can be treasured for years to come.