The Future of Business
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REVISED 3.1.25:
The Business Collective Contract
EQUITY in the Business Collective is based upon the sum of three separately computed categories, the total constituting the percentage (out of 90 or 100) of the net income (profit) to which each holder of equity (owner-operator and/or investor) is entitled per allotted time period (typically 1-3 months). Note that EQUITY is held separately from any wages or salaries which the Business Collective may assign to its owner-operators in order to provide basic income and/or to stay within the lines of relevant labor laws. The EQUITY calculation to be stipulated herein only pays the equity holders when the Business Collective was profitable (had positive net income) during the time period allotted to said calculation.
The three categories that are summed per equity owner are as follows:
(1) POSITION
The POSITION of the equity holder within the company as an owner-operator (if they are only an investor, this does not apply). The POSITION category is based upon the idea of merit out of 100, such that the workload and general value of the contribution that the owner-operator makes to the ongoing success of the Business Collective is given a point/percentage total relative to their merit in comparison to every other position within the Business Collective. Generally speaking, the POSITION category will hold more of the EQUITY total than the other two categories. If, for example, it is decided that half (50%) of the EQUITY in the Business Collective shall be awarded based upon POSITION, the INVESTMENT and ASSESSMENT categories shall split the remaining 50%. But this is only an example. Any particular Business Collective may choose a greater or lesser percentage to assign to any of the three categories at its official founding, and may choose to reassess this distribution based upon a majority equity holder vote at the initiating of any new time period. When new owner-operators are added to the company, or if owner-operators leave the company, the point total held by every owner-operator must be readjusted. For the purposes of ease of accounting, it’s recommended that no official change in position be recorded to the Business Collective contract until the end of the current allotted time period. A simple example of the POSITION category for five founders of a company might be: CEO 30% COO 20% CFO 20% CTO 20% Accountant 10%. If POSITION is awarded 50% of the equity calculation, then each of these percentages will but cut in half to determine the point total, out of 100, awarded to each of the five equity holders in the Business Collective. If the Business Collective isn’t profitable for time period for which the POSITION calculation is to be applied, no calculation is made. In this case it is likely that the INVESTMENT calculation may be expanded, and relied upon to keep the Business Collective solvent.
(2) INVESTMENT
The INVESTMENT of the equity holder within the company with or without being an owner-operator determines this second of three categories. This is the only of three categories in which equity in the Business Collective may be held without the equity holder being an active owner-operator (without possessing a POSITION within the Business Collective). Whether through one or more financial instrument(s), like a business start-up loan or a mortgage, or through out of pocket direct investment at startup, the investor(s) in the Business Collective receive points out of 100 for this category. A majority of the equity holders (based upon their total equity holding in the Business Collective) may vote to place a ceiling on how much of the total equity in the Business Collective may be accrued through this category, else face the possibility of takeover by outside financial interests, or just owner-operators continually accruing more equity in the Business Collective. By vote the equity holders may extend the offer to investors, either other owner-operators only and/or to outside investors, as to how much of an investment may be made for the coming allotted time period. If, for example, the Business Collective is financially stable and predicts a period of growth in the upcoming time period (typically one month to one quarter), investments may be closed altogether, or may only be extended up to a certain threshold for owner-operators (those with POSITION) only. If, on the other hand, the Business Collective faces financial instability and foresees needing more capital for the upcoming time period, such limits may be raised, and investment may be taken from both owner-operators and outside investors. Total investments made by anyone in the Business Collective is given a relative score out of 100 based upon total investments, whether made at founding, as initial start-up capital, or received at any time. In addition, by majority equity vote, the percentage out of 100 awarded to this and the other two categories whose sums generate the total equity held by the individual may be changed for the upcoming time period. If the Business Collective isn’t profitable for time period for which the INVESTMENT calculation is to be applied, no calculation is made. In this case it is likely that the INVESTMENT calculation may be expanded, and relied upon to keep the Business Collective solvent.
(3) ASSESSMENT
The ASSESSMENT is the democratic portion of the total equity calculation, and is typically given less weight than the other two categories. The idea of ASSESSMENT is to encourage the adding or subtracting of total equity based upon the perception of all owner-operators and investors in the company as to the extent which the owner-operators are impacting the success of the Business Collective. If, for example, an owner-operator receives a relatively low amount of equity in the Business Collective owing to manifold factors, such as, for example, the inability to invest, and the other equity holders believe that he/she deserves a greater share based upon their contributions, and their attitude, and their general ability to promote the success of the Business Collective, those other equity holders may vote to increase his/her share of equity holding through this third category. Unlike the other two categories, this category isn’t based upon total equity held, but is purely democratic; that is, anyone with any equity in the Business Collective whatsoever is given an equal share in the vote, with one vote per allotted time period. Or the Business Collective may choose for this ASSESSMENT category to be offered to those with a POSITION only (not to outside investors or previous owner-operators still retaining their INVESTMENT. If, for example, there are a total of ten POSITIONS in the Business Collective, each of them contributes 10% of the total influence to this category. The way in which this vote may be organized is near limitless. Every equity holder may be limited to making a single vote for a single individual that they believe deserves more benefit from the company’s success such that, in this example, that beneficiary receives that 10% of this third category, or every equity holder may feel free to assign their influence any way they want, given a 100 points to spread around amongst the equity holders they believe deserving. This third category is thus a means to ‘keep everyone honest,’ and to allow for owner-operators (and potentially INVESTORS as well) to express their ideas of merit with regards to the company in a way that makes a tangible difference. If the Business Collective isn’t profitable for time period for which the ASSESSMENT is to be applied, no calculation is made.
It is recommended that 10% of all profit go into an OPERATIONAL FUND for covering unseen expenses; a ‘rainy day fund.’ Over a certain threshold (over a certain level at which the OPERATIONAL FUND accrues capital) the funds may be tapped based upon a majority of equity ownership choosing one option as proposed an equity holder, with those propositions made by anyone with any equity ownership in the Business Collective. There is no limit to what may be proposed, including everything from awarding the over-the-threshold capital as a bonus to all equity holders based upon the percentage of equity they hold, to reinvesting it in the Business Collective, to throwing a company party, to most anything else of benefit to the equity holders. If the founding members of the Business Collective choose to implement this recommended OPERATIONAL FUND, the previous three categories sum to 90, not to 100.
If the owner of equity is actively involved in the ongoing business concern (if they play a role in the company demanding ongoing work) and wants out of the Business Collective (if they wish to divest), they may either have their share of equity purchased or they may convert it into INVESTMENT, or some combination of the two. If a majority of the equity ownership votes for their removal from the company, that voted-out equity owner is compelled towards this same action. Note that only the INVESTMENT category may apply to an equity holder if they hold no POSITION within the Business Collective. The POSITION and ASSESSMENT equity awards are predicated upon active participation in the Collective.
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ORIGINAL:
The Business Collective Contract serves as the formative document for business operations of any legal type, outlining the manner in which the subject company intends to award ownership and control of its operations, and to compensate all of its contributing members not as employees, but owner-operators.
This document is intended to serve as the legal foundation of any subsequent contractual concerns entered into by the subject organization and its owner-operators, henceforth subject to this document.
Note that this is a template for the Business Collective Contract, and that all specific calculations and figures herein may be altered relative to company control, advised to be based upon voting concern.
All ownership equity in the organization shall come with it a level of compensation to be defined both in value and in the timeliness of its payouts herein, calculated based upon net dividends relative to the percentage of equity owned by the owner-operator, per the net revenue produced by the organization. By “net revenue” it is agreed that the division of all revenue after all expenses and money reinvested in or otherwise held by the organization as defined by this organizational document is to be paid to all of the owner-operators relative to % equity on the timeline agreed to by the founding owner-operators.
Positions shall be created for the purpose of constructing an operational framework for the organization. Every position created or removed must be agreed upon by a majority of the % voting concern (to be defined shortly, based upon % equity) of the organization, both at the time of the founding of said organization, and whenever it is deemed necessary that a new position be created, a position be removed, or a person filling a position be replaced by a new person.
Any change in this document or in any subsequent documents regarding the compensation of owner-operators and the allocation or division of revenue and debts relative to the organization requires that a majority of the voting concern be reached before said alterations can be deemed legally binding.
This document shall define which actionable decisions reached and carried out by the organization are subject to a majority of the voting concern, and which the prerogative of positions, or position groups.
For the purpose of this business collective contract template, it shall be assumed that every owner-operator in the subject organization shall be compensated for their equity ownership relative to total equity once per month, or twelve times per annum. The total amount of this monthly compensation shall be based upon their claim to the net dividends of the organization from the month prior, to be paid on the first of the month, based upon their % net dividends share, which is based upon their % equity, the calculation of which is forthcoming.
Any person removed from their owner-operator position within the company must be compensated by having the value of their equity paid out to them before they can be legally removed from their owner-operator status within the organization. The equity value held by every owner-operator shall be defined herein, and is always based upon the % net dividends share calculation defined herein.
The % net dividends share for every owner-operator is based upon their % total equity. The % total equity may be distributed not only to individual owner-operators, but to funds, going-concerns, or any other entity, financial or personal in legal status, which the majority of the voting concern sees fit. Note that these three underlined terms shall all be the same figure, yet may have different applications.
Calculation of % net dividends share, % total equity and % voting concern shall henceforth be considered the “Company Share” dedicated to the relevant entity. Incentivization is a key concept in the creation of the derivation of the Company Share calculation, as said incentive motivates the best results.
Company Share is calculated in three parts as follows, and shall come to a decimal convertible into a %:
Part One: Investment Value: The amount of money invested or reinvested in the organization by the subject entity. Part one of the Company Share calculation involves translating the start-up and ongoing financial support and sustainability of the subject organization by the owner-operators into equity, as obviously having the means to continue and potentially expand the operations of the organization beyond whatever the organization retains for said purposes (it is highly recommended that an ‘operational fund’ receive a considerable portion of the net-equity-based dividends, it being one of the entities assigned said equity) is of immense value to the continued concern of the subject organization. For the purposes of ‘fairly’ retaining and distributing control (voting concern) and net dividends relative to the value of every owner-operator to the organization, and to prevent wealthy owner-operator(s) from taking control simply because he/she/they have more money/capital to invest in its expansion and continuation, it is highly advised that a limit, or ‘cap,’ be placed upon the amount of money or otherwise agreed upon capital invested in the organization that can be translatable into Company Share.
Part Two: Position Value: The relative value of the labor and other intangible assets contributed by the entity which expands upon the value of the subject organization. This includes everything the owner-operator does to help continue and expand upon company operations, profitability and general financial viability, which might include subjective considerations such as ‘ingenuity.’ Not every owner-operator contributes the same value, and takes on the same level of stress and responsibility in the operation and continuity of the subject organization, which Part Two of the Company Share calculation reflects. At the start-up of the operation and, potentially, at future predetermined junctures, the Business Collective Contract upon which the organization is founded should include considerations, or votes, for how the values assigned to each position shall be determined/adjusted relative to democratically assessed value.
Part Three: Democratic Value: The ‘value adjustment factor,’ the Democratic Assessment represents a vote by the owner-operators in which all owner-operators assign their value of this assessment to an entity other than themselves. Each owner-operator possesses the same value within the Democratic Assessment. That is, if there are exactly 100 owner-operators, each one controls 1% of the total value placed upon Part Three of the Company Share. Furthermore, every owner-operator may assign their relative portion of the democratic value however they see fit. It is recommended that the once per month ‘vote’ described herein take place via an electronic or paper form that lists all possible entities to whom every owner-operator may pass any portion of their relative democratic value, including all other owner-operators and any funds, causes etc. which the subject organization maintains and supports. For example, he/she may give all of his/her value to one other owner-operator or, say, a retirement or communal outing or charity fund, or custom divide it between a handful of owner-operators, or select a box saying something like “divide evenly amongst all owner-operators,” or whatever/whomever else he/she believes most warrants more compensation. Note that the inclusion of this third part of the Company Share calculation serves several purposes, including allowing for a sense of justice for said owner-operators, and a means to translate into financial value the goodwill and other subjective considerations which every owner-operator develops. As such, it serves to reward those best serving the company interest and/or being the most positive influence on others, thereby building goodwill within the subject organization. For example, a certain owner-operator may have performed some act, or continues to do their duties ‘above and beyond expectation/paygrade,’ and their fellow owner-operators may wish to recognize this in a means that leads to a tangible reward for said person.
It is recommended that all three of the factors in the Company Share calculation be calculated on the first of every month based upon the information available at said time to the company accountant(s). It is highly advised that this calculation, and all relevant data included in said calculation, be fully disclosed to all owner-operators. Full transparency is in spirit with the just distribution of benefits motive of this contract, and of the ideology behind the Business Collective concept in general, which seeks to balance the merits of just considerations often judged as ‘socialistic’ with the just incentives of the ‘capitalistic.’
Note that the percentage of the total calculation that any Business Collective chooses to place in each of these three parts of the Company Share calculation is entirely open to their judgment at the time of the signing of this document, and at any subsequent time which the voting concern chooses for alteration. The percentage placed on each part of the assessment shall reflect the convictions of the founding owner-operators at the time when this contract is first signed, and shall surely impact its operations.
Example of a Company Share breakdown at start-up:
Core breakdown: 40% Investment Value (IV), 40% Position Value (PV), 20% Democratic Value (DV)
10 owner-operators sign this founding document. Those owner-operators are assigned positions, all of which are simultaneously assigned a Position Value, which is the % of the 40% of net dividends per month which they’ll be henceforth entitled to. Each of these owner-operators also invests a certain amount of money or other majority-agreed-upon capital value to start the organization. The 10 owner-operators make the following monetary investments and receive the following Position Values:
38K total invested at start-up.
20% of Company Share retained for an “Operational Fund” or “Going Concern Fund”
5% of Company Share retained for a “Communal Fund” to be dedicated to vote for use (parties/outings/charity)
75% of the Company Share to be distributed amongst the owner-operators, determined as follows:
1 Chief Executive Officer (10k IV, 20%PV = 26% of IV, 20% of PV)
1 Chief Financial Officer (10k IV, 15%PV = 26% of IV, 15% of PV)
1 Chief Operations Officer (10k IV, 15% PV = 26% of IV, 15% of PV)
1 Head of Marketing (5k IV, 11% PV = 13% of IV, 11% of PV)
1 Administrative Assistant (1k IV, 8% PV = 3% of IV, 8% of PV)
1 Clerical Staff (500 IV, 8% PV = 1.5% of IV, 8% of PV)
3 Marketing Staff (500 IV each, 6% PV each = 1.5% of IV, 6% of PV each)
1 Janitorial Staff (0 IV, 2% PV = 0% of IV, 5% of PV)
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