Confidential Working Framework · Steve Lugo & David
Verified is a platform that acquires trade firms, puts them on our system, and consolidates them to sell. This section fixes the two structures everything downstream depends on: how you and David own and control the venture, and the legal, integration, and governance mechanics of each deal. The seller-facing sourcing and acquisition loop lives in the dedicated Acquisition Playbook.
Strategic framework for discussion — not legal, tax, securities, or accounting advice. Entity, tax, and investment terms must be confirmed with qualified counsel and a CPA before commitment.
The scorecard every recommendation below serves — agree on these before picking a form.
Downside protection and a priority return for the person with money at risk — plus credit for the sweat, licensing, sourcing, integration, and captive demand, not just the cash.
The ROC license and Qualifying Party sit in the right entity, de-risked — with clean vehicles to buy shops, layer bank/SBA financing, and isolate liability deal to deal.
Preserve every exit — sell whole, carve out a licensed division, or keep the cash flow (buyers pay for clean structure) — and use vesting to keep the key people through the multi-year build.
A holding-company-over-operating-company structure. The Verified Companies, LLC (the HoldCo) sits on top — David's capital and any acquisition debt live here; it holds equity, does no fieldwork, and owns 100% of five separate operating divisions, each its own trade, brand color, license, and Qualifying Party (director = QP = owner-operator). The rollout is gated: Construction + Electric in Year 1 → Plumbing in Year 2 → HVAC in Year 3 → Civil ~Year 4. Details per division below.
Five separate divisions — each its own color, license & QP (director = QP = owner-operator)
Co-owning the HoldCo doesn't just buy an electrical roll-up — David acquires Icarus Construction LLC, a real licensed building company carrying a KB-1 (building) and an A (general engineering) license, which become Verified Construction and Verified Civil. Steve contributes the licensed entity, stays QP, and runs both himself; David owns it through the HoldCo — a licensed platform most people spend years assembling, on day one.
Separating the holding entity from the licensed operator isolates liability, lets David's capital and bank/SBA debt sit cleanly at the top, and gives a buyer one clean thing to purchase at exit. And because Arizona lets a Qualifying Party qualify only one licensed entity, we buy each shop's assets and customer book and run them inside the single licensed OpCo — so one QP covers the whole roll-up instead of needing a QP per shop.
You asked to see the trade-offs. Here's how David's capital can participate, from most partner-like to most lender-like — with what each means for control, risk, and your share of the upside.
| Model | How it works | David gets | You get | Best when |
|---|---|---|---|---|
| Equity co-owner | David owns common equity alongside you; shares governance and upside as a true partner. | Full upside, control rights, ownership. | A committed partner; less of the upside; shared control. | You want deep alignment and David's involvement long-term. |
| Passive / preferred investor | David funds via preferred equity — capital back first + a priority return — with limited day-to-day control. | Downside protection, a defined return, upside participation. | Operating control and a larger share of the upside above his return. | You run it; David wants protected exposure, not management. |
| Primarily lender | Capital is mostly a loan (interest + repayment) with a small equity kicker. | Lowest risk, capped return, minimal upside. | The most equity — you own nearly all of it. | Deals cash-flow enough to service debt; David wants simplicity. |
David is a silent partner (funds it, weighs in on big-ticket decisions, doesn't run operations); Steve does all the operating. The cleanest fit is the PE/real-estate sponsor–investor model: David is the passive capital partner paid first (return of capital + preferred return); Steve is the operating sponsor, paid a salary for the work and earning a promote on the upside. One nuance: David wanted to partner and share equity, not just lend, and will want a say on major moves (new acquisitions, new debt, selling) — so it's "silent on operations, active on major capital decisions." Section 04 breaks this into who-gets-paid-what.
David also offers a home base in the Scottsdale Airpark and Besins Group resources. Cleanest treatment: arm's-length and paid — the company leases the space and uses resources at agreed rates, disclosed like the McCully relationship — so David earns rent/fees on top of his equity return. Symmetry point: because David's assets are compensated separately, Steve's contributed KB-1 GC entity is recognized through his 45% operator carry (vs. a typical 20–30%). Besins' attorney and CPA can handle formation and tax, but Steve should retain independent counsel on the partnership terms.
Two things get rewarded, kept separate: pay for work (salary/fee for duties performed) and return for capital & value creation (equity, preferred return, and the operator promote). David is paid for his money; Steve is paid for his work and the value he builds. The profit waterfall runs return of capital → 10% preferred return → 55% David / 45% Steve, with the team's vesting equity (Adrian 5% on electric, 5% per division lead) carved entirely from Steve's 45% so it never dilutes David. Steve draws a scaling operator salary; David takes no salary.
The complete pay tables — per-person salaries, QP/oversight wages, bonuses, and the team equity carves — are set out in Key-Person Equity (§11), and roles and reporting lines in Organization & Roles (§12). This section only fixes the two-layer principle and the headline waterfall; refer there for the numbers rather than duplicating them here.
Each licensed OpCo holds its own ROC license with a Qualifying Party who is a bona fide member/officer (Adrian for Verified Electric; Steve for the reactivated Icarus KB-1 and A licenses that become Verified Construction and Verified Civil), and David can own equity without being a QP. Because one QP covers only one entity, the electrical roll-up runs through a single licensed OpCo with acquisitions folded in as assets — so develop a second qualifier early and confirm QP authority, the Icarus reinstatement (~$2,260, routine), and the one-OpCo approach with an Arizona construction-licensing attorney before the first close.
McCully Construction (Nick, President — whose construction Steve runs) can engage Verified as its electrical subcontractor on residential remodels, giving the pilot and each acquisition a warm pipeline from day one. Because Steve sits on both sides, keep it a separate arm's-length subcontractor with competitive bids, written ownership disclosure, market pricing, and McCully sign-off under a short related-party policy — the same discipline applied to the other related-party relationships noted throughout.
Sourcing acquisition targets is the primary engine; the homeowner panel-upgrade offer is a hook that stands up the licensed entity and puts one truck on the road — a bridge until the first firm is bought, not an organic growth engine. Outreach runs on in-house AI (target lists from ROC records, ratings, and owner-age signals; personalized outreach, valuation, and follow-up), with David or Steve closing the retirement/legacy conversation in person — contractor-buying-contractor being a trust signal a broker can't replicate. What we sell the owner — The Verified System (AI back office, JobTread, the field kit, playbooks, and the Verified estimation process) alongside a buyout — and the full source→show→buy→integrate loop are detailed in the Acquisition Playbook; this section covers only the ownership, legal, and integration mechanics beneath it. The one variable sourcing cost is a flat $1,000 referral fee paid when a referred shop closes into a division.
Acquisitions are the strategy — each division is built by buying firms. The deal: offer the owner a seat on the sellable system plus a buyout, buy the assets (not the shell), pay part cash / part seller note tied to performance, keep the owner on a normal wage, and make rebrand + migration onto the system a condition of close. Multiple arbitrage — buy at ~4×, exit the consolidated platform at ~8.5× — plus scale and recurring revenue is the return. The seller-facing pitch and the triple-win economics (~$250k+/yr of delivered value on top of the buyout) live in the Acquisition Playbook; below are the structural and integration mechanics unique to this section.
Buy assets, customer book, trucks, and goodwill under your single licensed OpCo and QP (not a QP per shop) — cleaner on liability and tax than the shell; standard non-compete, seller's license wound down or seller stays as a covered employee (confirm with a CPA per deal). Price ~2.5×–4.5× SDE, blended: part cash at close, the rest as seller note / earn-out over 3–5 years from the business's own cash flow, with slices held back against customer retention and a knowledge-transfer milestone (a named apprentice signed off to a defined skill level) — capturing the craft before the founder leaves and feeding the Verified Training System.
Converting to Verified (trucks, uniforms, invoicing, marketing) and migrating the shop onto The Verified System — AI back office, JobTread, field kit, playbooks, and meshing the shop's estimating into the Verified estimation process — is a condition of close. Wrap the seller's existing vehicles at close (they convey with the purchase and become instant billboards; Verified bears the ~$2.5–5k/vehicle cost), and starter uniforms convert the crew day one. The owner takes a normal electrician's wage on top of the purchase payments and carries the transition — a gradual, dignified exit while relationships hand off. Migrating the book is what makes it system-run, not founder-run — and worth a platform multiple at exit.
Ownership flips to you at close, but the seller stays economically and operationally involved on a fading curve — full control to you, gradual exit for them.
Agree price, cash/note/earn-out split, stay-on role, and branding condition before diligence spend.
Assets and goodwill transfer to your OpCo; cash paid, note/earn-out begins, brand conversion starts. Seller signs on as a paid electrician + non-compete.
Fold into one dispatch/invoicing/marketing; seller introduces customers and trains a named replacement. Retention and training holdbacks track.
Note and earn-out pay down from cash flow as targets are met; the shop becomes a fully integrated node — seller retires with a soft landing, or stays on by choice.
Acquisition runs as a pipeline you run again and again — source, show the sellable system, buy, migrate onto it, repeat — each stage gated so capital only advances against evidence. Run it to target size in one trade, then start the next: electric → plumbing → HVAC → civil. The stage-by-stage pipeline (source → screen & show the system → LOI → diligence → structure & finance → close → migrate → optimize & repeat, each with its gate) is laid out in the Acquisition Playbook.
A funded M&A / integration team owns the loop, because integration — not sourcing — is the real risk. And the same gate discipline that protects David's capital in Part A applies to every stage: each must clear before the next dollar moves.
What to settle with David — and with counsel and a CPA — to lock the structure before the first deal.
Agreeing David's participation and split, and confirming the licensing approach with an attorney, are the gating steps. With those settled, the sellable system gets built in the opening weeks, the panel-upgrade hook puts a truck on the road to stand up the entity, and the acquisition pipeline — the real engine — starts sourcing.