Advice on Salary Allocation in 50/50 Profit Sharing – Contractor Role
Kronos
| Posted in General Questions on
Seeking guidance on a 50/50 profit-sharing agreement for a custom home project in Florida. I serve as the contractor and Project Manager, while my employee handles the role of Site Supervisor. The investor/partner covers land purchase and construction costs.
I’m unsure whether my share of the 50% profit after the house sale should be used to cover the Project Manager and Site Supervisor salaries, or if these payroll expenses should be considered part of the construction costs paid by the investor.
Any insights or experiences with similar profit-sharing arrangements would be greatly appreciated. Thanks!
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Replies
Depends on how the contract is worded and who are the contracting parties. Need more specifics on who pays various costs.
In our partnership, I take on the responsibility of managing the budget, overseeing all financial aspects from land purchase and permit fees to architect expenses and construction costs. While the investor is the one writing the checks, my role is to ensure efficient management and prevent any unnecessary expenses. This approach aims to maximize profitability when we sell the house, allowing me to retain my 50% share. My team is dedicated to day-to-day construction activities, and I handle administrative tasks such as permit applications and inspection compliance.
It seems like the real question is whether Project Manager and Site Supervisor are billed "above the line" (part of job cost) or "below the line" (part of overhead costs). The construction companies I'm familiar with are all over the place on how they handle this; in most cases you would adjust your markups so your net profit is the same either way.
My net profit will be either the 50% share after the sale minus my payroll to run this project or all my project overhead cost gets added to the construction costs paid by the investor and we get the 50% in full as profit.