LLC set up and profit distribution

longnshort

We are at a real dilemma as to divide up profits. We have 4 partners, 2 contributing the same amount of capital, 1 contributing somewhat less, the 4th, a great deal less. Naturally, the 2 with the greatist risk are entitiled to the greatist return. However all partners will be working extremely hard, giving equal amounts of effort, many hours and all partners have value to contribute. How can we fairly divide profits so the lessor partners can benefit and grow into the company, compensating all for time put in as well as risk. An equal split based on % investment will simply not allow this. 

drvag

Usually the operating agreement would address this.  But since the 4 partners do put in an equal amount of time / energy and each has value to contribute...  maybe you could do a blended distribution.  50 % of profits split according to capital contributions and the other 50 % split based on time contributed.

RetiredMember4

Have you thought about dividing duties instead of profits? Perhaps those
partners who have less capital to contribute may make it up by taking on
extra duties or different responsibilities. This way, profits can stay equally
divisible but work responsibilities can be divided to make up for the unequal
capital contributions.

longnshort

Thanks for the input everyone. 

rlong1073

Great input everyone.  If only I needed to know about having four partners this might be applicable.  Any ideas for people that can`t just ask you questions to your face and talk behind your back?
No need to respond.  Not really for you in this forum.

infinique

It all depends on what was agreed upon when the company was formed. It's hard to discuss this now without offending any of the existing partners.