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Financial Model for 3-Member LLC

    • 1 posts
    April 2, 2010 1:54 PM EDT

    I've been working successfully as an independent software consultant for two years and have been seeing an increase in demand for my services.  I have two associates who are interested in taking on intermittent consulting jobs and we are discussing the logistics for partnering.  We've done some research and an LLC seems ideal for our situation.

    My questions are in regards to finances.  Our intention is to operate as independent contractors to the LLC (in which we will be equal shareholders).  The startup costs are minimal, we hope to keep overhead low, each of us will be responsible for our own individual operating expenses.  Our billing is hourly and payout will be based on hourly contribution also.

    1. Non-billable overhead.  Plan is to have an administrative fund with an established minimum balance.  When balance falls below minimum, each of us will contribute some fixed percentage of our billable earnings to the adminfund until the minimum balance is restored.  Or should we each just cut an equal-sized check back to the common fund?   If, let's say, I spend 10 hours managing finances for the LLC I would expect to be paid for my time from the admin fund.  Sound fair?

    2. Commissions/Finders fee.  Given that I have a well-established network, I will probably be finding the majority of new jobs and then employing my partners for the work.  We're discussing commission models.  Specifically, afixed percentage (10%) finder's fee for new job, lower percentage (5%) renewal fee for returning customers.  Are these numbers too low, too high?

    3. Risk/Contribution.  As I mentioned, I am established as a consultant and that's my primary source of income.  My associates both have full time employment and will be "trying out" contract work on the side initially (don't worry we checked for non-compete conflicts) with interest in committing more fully if its a good fit.  How should this impact our Articles of Organization or compensation?  Should this be reflected in our shareholder percentage?  Does shareholder percentage have value in the model I've proposed?

    4. What financial stuff haven't we thought of yet?

    Thanks in advance for your input, apologies if this is too many questions for one post.
    Tom

    • 32 posts
    January 7, 2014 1:03 PM EST


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