Contractor is equity partner, pay him hourly too?

[Ken Nyczaj]

Hey Everyone,

Settlement is next week for my first flip. I have some questions about how our profit/ payment structure is setup, here are the details:

--- 4 Owners in an LLC taxed as an S Corp

--- Myself and 2 other people have 30% equity ownership and the fourth has 10% equity ownership.

Currently we have agreed on that the GC/ my friend/ business partner who is a 30% owner, gets paid every two weeks an hourly wage but that payment is deducted out of his profit he receives at the end.

Should these hourly wages not be deducted from his profit and he makes profit plus hourly?

At first I thought no, because he brings the contracting to the table and has relationships with subs but, I've done the self prepared DM marketing campaigns, taking phone calls, building rapport with prospects to sellers, finding the deal, building our team (lenders, title, insurance) for the past 6 months, and did not get paid for any of that work. And, I will not be getting paid hourly for my continuous efforts in building a massive marketing campaign. Plus I will be helping him work on the house on the nights and weekends when I'm not at my full-time job.

That being said, this is now his full-time job where he could be putting in 40-60 hours a week, which certainly will eventually add up to more time than I've put in.

Is this a fair way to structure the deal? Should we be paying ourselves hourly for any work done in the business? Instead of hourly, should we set up an incentive program for him where he can make bonuses for money saved by using him opposed to subbing work out?

 Any advice would be appreciated.