📚
Board Compensation
Operations
Profit-sharing model where board members receive distributions from remaining profits after operating expenses, rainy day fund contributions, and annual budget allocations.
Key Points
- ✓ Profits calculated after all operating expenses paid
- ✓ Minimum rainy day fund maintained before distributions
- ✓ Annual budget for next year set aside first
- ✓ Remaining profits split equally between board members
- ✓ Distributions made quarterly or annually as determined by board
- ✓ Documented as guaranteed payments or profit distributions for tax purposes
Distribution Formula
Gross Revenue Total income from all subsidiaries
− Operating Expenses Payroll, supplies, utilities, insurance, etc.
− Debt Service Loan payments, mortgages, lines of credit
− Reserve Contribution Amount needed to reach/maintain rainy day fund minimum
− Budget Allocation Set aside for next year's capital and operations
= Distributable Profits Remaining amount available for distribution
÷ Board Members Split equally between all board members
Key Parameters
Minimum Reserve (Years 1-2)
3 months operating expenses
Example: $45,000
Minimum Reserve (Years 3+)
6 months operating expenses
Example: $90,000
Distribution Frequency
Annual (Years 1-3), then quarterly
Example: Q4 each year
Board Members
Current number of board members
Example: 2
Year 5 Annual Distribution
| Gross Revenue | $357,000 |
| Operating Expenses | -$180,000 |
| Debt Service | -$24,000 |
| Reserve Contribution | -$10,000 |
| Budget Allocation | -$63,000 |
| Per-Member Distribution | $40,000 |
* Per board member (2 members)
10-Year Distribution Projections
-
-
8K
23K
40K
60K
70K
80K
95K
115K
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
Y10
| Year | Revenue | Expenses | Distributable | Per Member | Notes |
|---|---|---|---|---|---|
| Year 1 | $0 | $0 | $0 | $0 | Construction phase |
| Year 2 | $36,000 | $30,000 | $0 | $0 | Building reserves |
| Year 3 | $114,000 | $75,000 | $15,000 | $7,500 | First distributions |
| Year 4 | $217,000 | $120,000 | $45,000 | $22,500 | |
| Year 5 | $357,000 | $180,000 | $80,000 | $40,000 | |
| Year 6 | $489,000 | $220,000 | $120,000 | $60,000 | |
| Year 7 | $563,000 | $250,000 | $140,000 | $70,000 | |
| Year 8 | $638,000 | $280,000 | $160,000 | $80,000 | |
| Year 9 | $742,000 | $320,000 | $190,000 | $95,000 | |
| Year 10 | $865,000 | $360,000 | $230,000 | $115,000 | Mature operations |
Important Notes
- ⚠ No distributions until reserve minimum is met
- ⚠ Distributions treated as LLC profit distributions for tax purposes
- ⚠ Board members receive Schedule K-1 annually
- ⚠ Draws against anticipated distribution allowed (max 50%)
- ⚠ Annual review of reserve requirements and distribution frequency