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What is reasonable compensation for LLC management?

My wife and I have our own LLC, which was setup in 2013 as a management company. The initial purpose was to provide the management services for a family LTC LLC started in 2013. That LLC holds real estate (surface and minerals), which requires a property manager, mineral manager, accounting, legal and trustee services. There are many moving parts. I spend approx 20 to 30 hours per week on management tasks, and she spends 3 to 5 hours. (in 2013 it required full time). Tasks included keeping records, scanning & document management, tracking income/expenses, and communications among all members and professional. Question: We have budgeted $4,000 per month for our management services. Most members are okay, but others ask, how do you come up with that figure? We have been working since 2013. For the benefit of the LLC cash flow, we have not paid our monthly fee, but the fees are still due. We have started to take fees over the last 2 months for a total of $8,000. At our annual meeting last week, the fees are noted on the P/L sheet for the last two years. Hoping to get our invoices paid up soon. Thanks for anyone's thoughts. D

Answers

Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |

Anon,

Parsing it out into bits; some of this sounds like it could be automated, some outsourced, some needs real hands-on.
The question is, how to parse it out?
My gut reaction is:
-Virtual Accounting (think scrubbed.com) for record keeping, tracking, bookkeeping etc. That should run you about $500/month.
-The rest of it sounds like your role (managing the folks, communicating, working with the trustee services). That is somewhere in the region of "Controller-Level" work. If that is half-time, outsourcing it would cost you $75-$100 / hour (depending on location and quality). That sounds like $8K a month, give or take a few thousand. I certainly wouldn't do it for much less than that.
-Finally, let's say you hired the controller and scrubbed.com, bill.com, gusto, and a bunch of other providers, so all you're doing is herding cats. That should run you $10K a month (maybe less if you're a good negotiator), so for your *few* hours of management maybe $1K a month would be fair, and you get on with other things.

Honestly this sounds like a full time job, so you should be compensated accordingly.

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