I first advice would be to talk with a local business lawyer. However, I see you already have an appointment. Good.
I don't want to step on your lawyer's toes, so I will offer some general comments only. First I do not like a partnership for this arrangement. In a (general) partnership, the partners all have personal liability for the debts of the business. Since you will not be active in the business, you will have no way to control those debts or even know if the debts are being paid until it is too late. So avoid general partnerships. A limited partnership may work. A problem with any partnership is that operating losses eat away at your capital account and you will not want that. Sure you do not expect losses, but they happen so you need to plan for those just in case. A corporation may work for this. But then you have the tax issues. If you go S-corp, you will be taxed on the net profits. You would need an arrangement in place to cover distributions to pay your tax burden. If you go C corp, you do not have that problem, but have a different one. Your investment is locked in at the corporate level. Distributions from the corporation are generally taxed to you as dividends. So, you would have to find a way to earmark the repayment of your investment or pay income tax on the money as it comes out. Being an LLC is less formal than a corporation. But does not solve the income tax problems. LLCs are not taxed for income tax purposes as LLCs. The LLC elects to be taxed as a corporation (with a possibility of an S corp election) or they are taxed as a partnership.
I see drafting problems in guaranteeing the return of your investment. If your 900K is all treated as capital contributed, getting it back is not exactly simple. If the business is a partnership, getting your capital investment paid back generates problems with the partnership accounting and your ownership percentages. Must be careful in any partnership arrangement. If this is a corporation, distributions to pay your 900K capital investment generally are considered to come from earnings and thus are dividend distributions. To do otherwise may reduce your stock, ie stock redemption. The problem I am getting at in both of those lines, is you plan to be a 50% owner and you will need to protect your ownership percentage in whatever form you choose.
Another problem you should address is a way to guarantee you continuing enjoyment of the business profits after your 900K is paid back. I can see where the other party may try down the road to pay off your 900K and cut you out of future profits. You need some protection against that scenario.
The flip side of the coin should also be considered and planned for. How do you get out eventually? Stock in a closely held business is difficult to sell if you have less than a majority interest. Limited marketability. Need an exit strategy both for normal exit down the road and an emergency exit should something happen that forces you to need out sooner.
Also need to consider how your interest in the business is protected in case of the other guy's death. If he runs the business and is vital, what happens if he dies suddenly. Key man insurance. What if he decides to walk? No idea how to protect against that one, maybe some form of no compete clause or early exit penalty. What if you die? Will the interest pass to your estate? Partnerships don't unless the partnership agreement allows for that. You estate may need liquidity? If so, perhaps key man insurance and a buy out provision. That way your estate can be bought out and the company will have a source of funds to do that (the insurance).
I suppose there are a lot more issues, but those are the ones that pop to mind. Good luck. Successful business ventures require good planning.
Later,
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