b'8. Decide How You Will Split Money With Investors(pro rata).A single investors percentage interest is usually calculated by dividing the amount of that investors capital contributions by the to-tal capital contributions of all investors in the company or in its class. An investors percentage interests, both in the company and in its class, will determine its voting rights and its rights to distributions. Equity is equal to the capital contributed by the investors. 19 Note that equity does not take into account the purchase price or the value of the asset you are purchasing or developing. The percentage of distributions does not have to match an investors percentage interest if a different split is described in the companys governing documents. You could sell 99% of the inter-ests in your company to investors, while management keeps 1% of the ownership and voting rights for itself and the right to receive 40% of the distributable cash. Options for Splitting Cash with Equity InvestorsThe members in a real estate syndication may be paid distributions periodically during operations, or on refinance or disposition of assets.For non-real estate investments, distributions might not be made until a new round of financing is obtained or the company is sold. In either case, equity investors are members who are entitled to receive a share of the companys profits.Investors may be offered:A straight split of distributable cash.A preferred return that gets paid to the investor class before the management class takes its share of profits.A fixed return, with management keeping the remainder. A straight split is pretty straightforward. If the company receives dis-tributable cash, it gets split between equity investors and management pro rata. The split is usually directly related to the percentage interests each class of members owns in the company, as shown in the previous example. Apreferredreturnwilltypicallyrangefrom6%to10%,calculated against the amount of the equity investors initial investment, plus a share of profits. If your company is offering a preferred return, you may pay all 19 Equity: On a companys balance sheet, the amount of the funds contributed by the owners plus the retained earnings (or losses). https://www.investopedia.com/terms/e/equity.asp.87'