THE VAULT · Founder Distributions

Last updated: 2026-07-28 Status: Planning

Governing Principle

Distributions are earned when the business has proven it can sustain them. The waterfall below is not negotiable. No founder, co-founder, or equity holder receives a distribution until the reserve floor is satisfied and debt is current. Taj built this. She does not take a check that breaks the machine.

Compensation Structure by Year

Taj Hines (Founder, 60% equity)

Taj’s Y3+ combined target (salary + distribution): $750,000 to $1,000,000/year.

At 60% of distributable EBITDA, with Y3 EBITDA of $2,980,000 and a 35% distribution payout ratio: - Distributable pool: $1,043,000 - Taj’s share (60%): $625,800 - Plus $250K W-2: $875,800 total Y3 compensation

This hits the $750K to $1M target at base case without stretching.

Trill Walker / TWG (10% equity, CSO role)

At Y3 base: 10% of $1,043,000 = $104,300 distribution to Trill/TWG.

Trill’s economics from VAULT are primarily: equity appreciation, Invitational production fees, and advisory positioning. This is intentional. The CSO role is strategic, not operational.

Outside Equity Investors (25% combined)

No investor receives a preferred return ahead of the reserve floor. No cumulative dividend. Investors participate in upside; they do not extract cash in the ramp period.

Distribution Waterfall (In Order)

Before any distribution is approved, all of the following must be satisfied in sequence:

Distribution Payout Ratio by Year

Y2 payout is limited to H2 (Months 19-24) and only if reserve floor is confirmed. No Y2 distribution before Month 18.

Y2 Partial Distribution (Gate)

Taj may receive a partial distribution in Y2 if and only if:

1. Reserve balance exceeds $1,200,000 (approximately 4 months opex) at Month 18
2. EBITDA for the trailing 3 months is positive
3. No outstanding AP over 30 days
4. Board approval

If the gate is met: Taj may distribute up to $75,000 in Y2. This is a personal liquidity release, not a precedent for operating cadence.

If the gate is NOT met: Y2 distribution is $0, no exceptions.

Y3 W-2 Activation

Taj’s W-2 salary of $250,000/year begins at the start of Month 25 (Year 3 commencement).

The $250K salary is included in the Y3 fixed opex of $3,750,000. It does not come from the distribution pool; it comes from operating costs above the EBITDA line. This is important for equity holders: distributions are calculated after salary.

Equity Appreciation Path

Assuming a 3x revenue multiple on Y3 revenues of $9.6M:

Note: EBITDA multiples are more conservative for fitness businesses. Revenue multiples are used here because the brand, IP (Vault Invitational), and membership base command a premium over pure gym valuations. A strategic acquirer (luxury fitness chain, hospitality group, private equity rollup) would likely pay 3-5x revenue at this scale and margin profile.

Taj’s equity at base case ($17.3M at Year 3) dwarfs any short-term distribution she could take. Protect the equity. Do not dilute below 55% under any scenario.

Governance Rules for Distributions

1. Distribution votes require Taj’s approval plus written notice to all equity holders 10 business days in advance.
2. No distribution may be paid if the business is in default on any debt obligation.
3. Tax distributions are automatic (not discretionary) once net income is confirmed. They are sized at the highest marginal rate (37% federal + 5% NC state) and distributed to all equity holders proportionally to cover their pass-through tax liability.
4. No salary increases for any W-2 employee (including Taj) without board approval and reserve floor confirmation.
5. If any investor exits via secondary sale, Taj has right of first refusal at the offered price.
6. Trill/TWG’s 10% is non-dilutable below 8% without consent, unless Taj raises additional capital exceeding $5M in a subsequent round.

Tax Distribution Mechanics

VAULT operates as a pass-through entity (LLC). Equity holders owe personal income tax on their share of VAULT’s net income, even if no cash is distributed.

At Y2 net income of $916,160: - Taj’s taxable share (60%): $549,696 - Tax liability at combined 42%: approximately $231,000 - Required tax distribution to Taj: $231,000

This is a contractual obligation under the LLC operating agreement. Tax distributions are not counted against the distribution payout ratio. They are sized and paid separately, regardless of whether the cash distribution gate is open.

All equity holders receive their pro-rata tax distribution at the same time. No selective distributions.

Summary Timeline