Salary and profit distribution in game industry?

A couple years ago, I started a group/team of passionate people in game development. I was the one who had the idea to form a group that will (hopefully) later be a company/real studio. I was the one who gathered the people too.

We are consisting of only a few people (< 10 people) and everyone has their own specialties in game development. For some reason, everyone agreed to make me the executive director of the group.

We are currently focused in creating flash games and mobile games. Until now, we have created a few free game titles and gained profit from some freelancing projects. Since I have no prior experience in running a "company", I decided to split the profit we gained from projects equally regardless of the member's role in the company, as long as he/she is involved in and have contributed a decent amount of work to the development of the project.

My questions are:

1. What is the correct way to split profit that is gained from freelance projects that are developed together?
2. Once we've released enough products and ready to register our company legally, what about the salary? What benefits do I have from being the founder and the director? I'm not a control-freak, but I want everything to be clear.

What you are describing is a partnership type of relationship which is a bit similar to that of a Law firm or a consultancy firm (at least the freelance part is).

This type of companies usually have a hierarchical compensation structure when it comes to revenue splitting and positions. The titles and roles may vary a bit but the basic principles should apply in your case as well. Here is how it normally works:

1. Senior Partners - Usually founders of the firm or very experienced. When it comes to hourly based billing, these guys will charge clients premium rates for their hours. Senior partners are expected to use their connections to bring business to the company.
2. Junior Partners - Usually an employee can become a junior partner after spending a lot of time in the firm and gaining experience. They usually bill for their hours less than senior partners and are normally managing the relationship with clients.
3. Employees - Doing most of the work on projects. Employees wants to become Partners
4. Interns - Doing the dirty work and getting paid very low.

In terms of compensation, all of the above are getting salaries but the revenue is spitted only between the partners.

You seem to have a simple setup so I would suggest a simple solution:

• Determine a rate per hour, then record hours each one work. Payout according to actual work.
• For what's left: keep it in the company for investments, paying running costs (broadband, utility, rent etc.) and marketing.