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Eat What You Kill...

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  • #16
    all of this is more challenging as an S Corp than as a partnership

    since S Corp distributions are required to be allocated as to percentage of ownership, when there is a discrepancy between allocated Comp versus share of ownership, distributions can end up coming down to a lowest common denominator situation creating some conflict between the low earners and high earners

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    • #17
      Originally posted by ENT Doc View Post
      Talking to the individual might help but if you want to plan for future success (account for different partners coming on board in the future, life events, people choosing to work less) I’d break the costs down by individual vs group and fixed vs variable. Allocate accordingly. I think a split of overhead whereby some is a fixed % to all and the remainder variable based on collections is in order.
      This is how our group does it after years of minor squabbles.

      You just have to have one (or more) big meeting where you decide/vote which expenses will be fixed and which are tied to production. It's a bit of work up front, and our accountants helped us and grumbled a long the way....

      But once it's instituted and you get a few quarters done with your new model it's relatively smooth sailing. Definitely makes the accounting more complex but it seems to be the "fairest" way to do things.

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      • #18
        If the remaining partners share your point of view then call a meeting of all partners with the "non productive" partner and go in with an open mind. Dong gang up on him / her. Try to listen to his point of view that you might not have considered. Come to a consensus. Maybe he does not realize it or he might be willing to accept less for working less.

        Do not make any plans of changing compensation structure without a couple of "open mind" meetings.

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        • #19
          What is your specialty?
          I see infusions being mentioned as one of ancillaries (along with MRI). Specialty like rheum can have significantly high overheads related to infusion drugs and admin costs and you certainly do not want anything but strictly ‘eat what you kill’ for that. It may take some book keeping but well worth the time and $ spent.
          it will keep everyone happy in the long run and promote the sense of fairness.

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          • #20
            My group of 4 specialists has a hybrid model we all are OK with. We take 30% and split it equally. Then the remaining 70% is eat what you kill. I am the lowest producer and usually generate about 15% of the income. The senior guy makes about 40% of the income. I pay 15% of overhead and he pays 40% of overhead.

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