I work for a family owned building company and have completed a few flips over the past couple years. A few weeks ago, a long-time and highly valued client of ours approached us with the idea of partnering with us in flipping properties. They would be a hands off capital investor, and we would manage the entire process from finding the properties, renovating them, and selling them.
Our building company would be hired by the LLC to complete the renovations, and we would put a small markup (not as much as we usually do) on our services just to cover overhead.
We initially thought that the profits would be allocated in proportion to the amount of capital a member invested. After meeting with our attorney, he suggested that we split profits 70/30% for the first deal, 60/40% for the second, and 50/50% for all further deals regardless of the capital investments by members. We want to be as fair as possible with our potential investor, and initially thought this was not. Our attorney explained that although we are profiting a small amount as the contractor, we are also members of the LLC, and will be essentially in charge of running the whole operation and should be compensated accordingly.
Does anyone have any advice on this scenario? We are looking to be as fair as possible with all members and would like this business relationship to grow over the years. Thank you.
