Profit distribution and Operating Agreement Question

[Tom Kidd]

Hello all! I'm Tom Kidd and live in SW Ohio. I'm an attorney, more of a litigator than a transactional guy, but interested in becoming more of the latter as I get old and want to stop fighting with all those young turks.

Anyway, my question is I am looking to form an entity with a close friend. I will be bringing more money to the table. He will be bringing more construction/repair knowledge. Typically, I would base the profit distribution on the initial capital contribution, but I am not sure if that is equitable in this situation as his skills will likely be needed more often than my skills as an attorney. We do not intend to flip homes,.Thoughts on how to determine a just allocation in this situation? All suggestions are appreciated.

[Ned Carey]

@Tom Kidd you say you do not intend to flip houses. What do you intend to do? Generally flips are better for partnering because once it is done, you can chose to do another or part ways. If you are holding rentals. You are tied together for a long time. That means more risk something goes bad. I suggest a fair way to handle different amounts of capital contributions and different amounts of work & time contributed is to split ownership based on money contributed. Then pay salaries based on the amount of work each contributes