[kjs3]

IANAL.

I think it's appropriate to enshrine corporate structure & responsibilities, ownership percentages, and asset allocation in the incorporation document. I don't think that's the place for the compensation agreement, because it's much harder to change (e.g. has to be filed with the State). I think the right thing would be to have an LLC agreement covering incorporation, and individual employment contracts for each partner to cover compensation matters. That way they can be changed easily based on consent of all parties.

HOWEVER: This leaves you open to one partner not consenting to change an unexpectedly unfair situation. Include in the incorporation agreement a mechanism to resolve such disputes, as well as a mechanism to remove a partner for cause. A lawyer can provide language binding in your jurisdiction.

Oh...yeah. Having an up-front agreement on what happens if a partner gets paid out, but at a later time there's a claw-back from the customer, is a good idea.

And I agree with jesusmichael: you probably don't want to 1099 an owner/partner. Kinda defeats the purpose. I think a periodic distribution based on individuals work product is allowed, but I recall there are rules about how and how often you can do it. A tax accountant can explain all the details and options. IANAA(accountant).