LifeinAsia - 10:41 pm on Jul 30, 2009 (gmt 0) I agree- make it a percentage of sales, not profit.
I disagree -- you should, as an equity partner, be able to see their invoices and books. It'd be hard to hide the profit if you know what they are buying at!
They cannot escape from a percentage of sales; but there are plentiful ways to minimise the apparent profit.
Seeing the books has nothing to do with it. If the other partners give themselves a salary bonus that happens to be 100% of the profit, that leaves 0% of the profit left to share with FH. It's perfectly legal, perfectly legit, and not "hidden" anywhere in the books. Another way- the partnership contributes to the 401K plan for the other 2 partners- oh, FH is not an employee, so can't participate.
I agree- make it a percentage of sales, not profit.