Fund Allocation Framework — Lantern Cooperative
Purpose: Comprehensive framework for allocating revenue across the Four Pillars, employee rights, safe space partnerships, and profit sharing while ensuring sustainable growth and fair compensation.
Effective Date: 2026-01-09
Status: Financial Planning Document (requires 75% employee vote to change allocation percentages)
Executive Summary
This framework ensures that as Lantern grows, all revenue is allocated responsibly to:
- Four Pillars Support (Housing, Healthcare, Education, Food) — Employee benefits
- Safe Space Partnerships — Community safety infrastructure
- Platform Operations — Infrastructure and scaling costs
- Fair Compensation — Living wage to 3× cap with transparent scales
- Profit Sharing — Equal distribution among employee-owners
- Growth Reserve — Sustainable expansion and emergency fund
Core Principle: Revenue serves human needs first, profit second. All stakeholders (employees, users, partners) benefit before excess accumulation.
Allocation Categories
All revenue is allocated across these categories in priority order:
Priority 1: Essential Operations (Must-Pay)
- Platform Infrastructure — Hosting, Firebase, domain, APIs (1-5% of revenue)
- Payroll — Salaries for all employee-owners (40-60% of revenue)
- Payroll Taxes & Insurance — Legally required employer contributions (10-15% of revenue)
Priority 2: Four Pillars (Constitutional Commitment)
- Healthcare — 100% premiums, dental, vision, mental health (12-18% of revenue)
- Education — 5,000/year per employee learning budget (3-5% of revenue)
- Housing Support — Living wage ensures safe housing (included in payroll)
- Food Security — Living wage ensures adequate nutrition (included in payroll)
- Emergency Assistance — Four Pillars crisis fund (1-2% of revenue)
Priority 3: Community & Safety
- Safe Space Partnerships — Monthly donations to partner organizations (2-5% of revenue)
- User Safety Programs — SOS infrastructure, moderation, support (1-2% of revenue)
Priority 4: Growth & Sustainability
- Emergency Reserve — 6 months operating expenses target (5-10% of revenue until funded)
- Growth Investment — Product development, new hires, expansion (5-10% of revenue)
Priority 5: Profit Sharing
- Equal Distribution — All remaining profit shared equally among employee-owners (10-30% of revenue)
Total: 100% of revenue allocated transparently
Revenue Allocation Model
Standard Allocation (Steady State)
Based on 100 units of monthly revenue:
| Category | Allocation | Range | Notes |
|---|---|---|---|
| Platform Infrastructure | 3% | 1-5% | Fixed costs; decreases as % with scale |
| Payroll (Salaries) | 50% | 40-60% | Living wage minimum 75K, 3× cap enforced |
| Payroll Taxes & Benefits | 13% | 10-15% | Employer FICA, unemployment, workers comp |
| Healthcare (Full Coverage) | 15% | 12-18% | 100% employee + family premiums, mental health |
| Education & Development | 4% | 3-5% | 5,000/year learning budget + 3,000 paid time + overhead |
| Safe Space Partnerships | 3% | 2-5% | Community safety infrastructure |
| Emergency Assistance Fund | 1% | 1-2% | Four Pillars crisis support |
| User Safety Programs | 1% | 1-2% | SOS, moderation, safety features |
| Emergency Reserve | 5% | 0-10% | Reduced to 0% once 6-month reserve funded |
| Growth Investment | 7% | 5-10% | Product, hiring, expansion |
| Profit Sharing | 15% | 10-30% | Equal distribution to all employee-owners |
| TOTAL | 100% |
Minimum Allocations (Cannot be Reduced)
These percentages are constitutional minimums (see Immutable Rights):
- ✅ Payroll: Must fund 75K minimum salary for all employees
- ✅ Healthcare: Must maintain 100% coverage (0 cost to employees)
- ✅ Education: Must provide 5,000/year per employee minimum
- ✅ Safe Space Partnerships: Minimum 2% of revenue (or 1,000/month, whichever is higher)
- ✅ Profit Sharing: Minimum 10% of net profit (after all above costs)
Safe Space Partnership Funding
Partnership Model
Lantern commits to donating a percentage of revenue to partner safe spaces that provide crisis support, emergency housing, and community resources for vulnerable populations.
Constitutional Minimum: 2% of gross revenue OR 1,000/month (whichever is higher)
Funding Tiers
Partner organizations are allocated funding based on capacity and service level:
| Tier | Service Level | Monthly Funding | Annual Funding | Example Organizations |
|---|---|---|---|---|
| Tier 1 | 24/7 crisis centers with emergency housing | 500-1,000 | 6,000-12,000 | Domestic violence shelters, trans safe houses |
| Tier 2 | Drop-in centers with regular hours (5+ days/week) | 250-500 | 3,000-6,000 | LGBTQ+ community centers, mental health clinics |
| Tier 3 | On-call networks and part-time resources | 100-250 | 1,200-3,000 | Volunteer safety patrols, peer support networks |
| Tier 4 | Educational partners and resource providers | 50-100 | 600-1,200 | Safety training orgs, crisis hotlines |
Scaling Model
Pilot Phase (Months 1-12):
- Revenue: 5,000-10,000/month
- Safe Space Allocation: 2% minimum = 100-200/month
- Partner organizations: 2-3 local safe spaces in San Diego
- Budget: 100-200/month total → 50-100 per organization
Growth Phase (Year 2):
- Revenue: 50,000-100,000/month
- Safe Space Allocation: 3% = 1,500-3,000/month
- Partner organizations: 5-10 safe spaces across 2-3 cities
- Budget: 200-500 per Tier 1, 100-250 per Tier 2
Scale Phase (Year 3+):
- Revenue: 200,000-500,000/month
- Safe Space Allocation: 4-5% = 8,000-25,000/month
- Partner organizations: 20-50 safe spaces nationally
- Budget: 500-1,000 per Tier 1, 250-500 per Tier 2, 100-250 per Tier 3
Fair Pay Scale Framework
Core Principles
- Living Wage Minimum: 75,000/year (San Diego 2026 dollars)
- 3× Salary Cap: Highest salary ≤ 3× lowest salary (max 225,000 at 75K minimum)
- Transparent Bands: All salary ranges published internally
- Equal Profit Sharing: All employee-owners receive equal profit distributions
- No Geographic Discrimination: Remote employees earn same as local employees
Salary Scale Structure
Formula:
Salary = Base_Minimum × Multiplier
Where:
Base_Minimum = 75,000 (adjusted annually for inflation)
Multiplier = 1.0 to 3.0 (based on role, expertise, tenure)Sample Scale:
| Role | Multiplier | Salary | Rationale |
|---|---|---|---|
| Entry-Level Employee-Owner | 1.0× | 75,000 | Living wage minimum |
| Mid-Level Contributor | 1.3× | 97,500 | 1-3 years experience |
| Senior Contributor | 1.6× | 120,000 | 3-5 years or specialized expertise |
| Lead/Principal | 2.0× | 150,000 | 5+ years, team leadership |
| Executive/C-Suite | 2.5-3.0× | 187,500-225,000 | Founder, CEO, CTO (3× cap) |
Profit Sharing Calculations
Profit Definition
Net Distributable Profit:
Net Profit = Total Revenue
- Platform Infrastructure
- Payroll (salaries)
- Payroll Taxes & Insurance
- Healthcare (full coverage)
- Education & Development
- Safe Space Partnerships
- Emergency Assistance Fund
- User Safety Programs
- Emergency Reserve (if needed)
- Growth Investment
Distributable Profit = Net Profit (if > 0)Profit Sharing Formula
Equal Distribution:
Per-Employee Profit Share = Distributable Profit ÷ Number of Employee-OwnersConstitutional Minimum: 10% of Net Profit must be distributed (cannot be retained beyond reserves)
Distribution Schedule:
- Quarterly: If cash flow permits (preferred)
- Annually: If cash flow requires (acceptable)
Governance & Accountability
Budget Approval Process
Annual Budget:
- Finance team (CEO + elected employee committee) drafts budget
- 30-day review period for all employee-owners
- Budget presentation with Q&A session
- Requires 75% approval vote
- Amendments allowed via same process
Transparency Requirements
Monthly Financial Reports (All Employee-Owners):
- Total revenue and sources
- Expenses by category with % of budget
- Actual vs. budgeted variances
- Profit/loss and profit sharing amounts
- Safe space donations by organization
- Reserve fund balance
Quarterly Public Reports (Anonymized):
- Total revenue and growth rate
- Number of employee-owners and average compensation
- Safe space partnership funding totals
- Aggregate Four Pillars spending
- Profit margin and distribution policy
Interactive Fund Allocation Calculator
Use the calculator below to explore how revenue is allocated across the Four Pillars, safe space partnerships, and profit sharing at different scales. Try the preset scenarios (Pilot, Growth, Enterprise, Sustainable Growth) or create your own.
Scenario Presets
Custom Inputs
Budget Allocation (% of Revenue) — Editable
%$83,333
%$958,333
%$125,000
%$91,667
%$66,667
%$416,667
%$83,333
%$83,333
%$833,333
%$5,591,666
Of profit only%$0
Of profit onlyOperational Allocation: 32.9%Profit Margin: 67.1%✅ Valid
Monthly Budget (Dollar Amounts)
| Category | Monthly Amount | % of Revenue |
|---|---|---|
| Platform Infrastructure | $83,333 | 1.00% |
| Payroll (Salaries) | $958,333 | 11.50% |
| Payroll Taxes & Insurance | $125,000 | 1.50% |
| Healthcare (Full Coverage) | $91,667 | 1.10% |
| Education & Development | $66,667 | 0.80% |
| Safe Space Partnerships | $416,667 | 5.00% |
| Four Pillars Emergency Fund | $83,333 | 1.00% |
| User Safety Programs | $83,333 | 1.00% |
| Growth Investment | $833,333 | 10.00% |
| TOTAL OPERATIONAL EXPENSES | $2,741,667 | 32.9% |
| PROFIT BEFORE SHARING | $5,591,666 | 67.1% |
| Profit Sharing to Employees (100%) | $5,591,666 | 67.1% |
Per-Employee Annual Breakdown
| Metric | Amount |
|---|---|
| Annual Salary | $135,000 |
| Annual Profit Share | $789,412 |
| Total Annual Compensation | $924,412 |
Key Insights
- ✅ Operational budget valid: 32.9% allocated to operations, 67.1% available as profit.
- ✅ Exceptional compensation: Each employee-owner earns $924,412/year total compensation.
Enterprise Scale Example ($100MM Annual Revenue)
At massive scale, the allocation model demonstrates exceptional efficiency while maintaining all constitutional commitments.
Scenario Parameters
- Monthly Revenue: $8,333,333 (~$100MM annually)
- Employees: 85 employee-owners
- Average Salary Multiplier: 1.8× (more senior workforce)
- Safe Space Partners: 150 organizations nationally
Budget Allocation (Monthly)
| Category | Monthly Amount | % of Revenue | Notes |
|---|---|---|---|
| Platform Infrastructure | $10,000 | 0.1% | Negligible at scale |
| Payroll (Salaries) | $956,250 | 11.5% | 85 employees avg $135K/year |
| Payroll Taxes & Insurance | $124,312 | 1.5% | Employer contributions |
| Healthcare (Full Coverage) | $92,083 | 1.1% | $13K/employee annually |
| Education & Development | $68,708 | 0.8% | $9,700/employee annually |
| Safe Space Partnerships | $416,667 | 5.0% | 150 partners across US |
| Four Pillars Emergency Fund | $83,333 | 1.0% | Crisis support |
| User Safety Programs | $83,333 | 1.0% | SOS, moderation |
| Growth Reserve | $0 | 0.0% | Fully funded |
| Growth Investment | $833,333 | 10.0% | Product, expansion |
| TOTAL EXPENSES | $2,668,021 | 32.0% | |
| PROFIT BEFORE SHARING | $5,665,312 | 68.0% | |
| Profit Sharing | $5,665,312 | 68.0% | Distributed equally |
| NET PROFIT | $0 | 0.0% | All profit shared |
Per-Employee Breakdown
| Metric | Amount | Notes |
|---|---|---|
| Average Annual Salary | $135,000 | 1.8× multiplier |
| Annual Profit Share | $799,809 | Equal distribution |
| Total Annual Compensation | $934,809 | $77,901/month |
Safe Space Partnership Distribution
At $100MM scale, safe space funding reaches $416,667/month ($5MM/year):
- Tier 1 (40 partners × $750/month): $30,000/month → 24/7 crisis centers in major cities
- Tier 2 (75 partners × $375/month): $28,125/month → Regional drop-in centers
- Tier 3 (25 partners × $175/month): $4,375/month → On-call networks
- Tier 4 (10 partners × $75/month): $750/month → Educational partners
Total allocated: $63,250/month to 150 organizations
Key Insights at Enterprise Scale
Exceptional Profit Margins:
- 68% profit margin demonstrates extreme efficiency
- Each employee receives ~$800K in profit sharing (on top of $135K salary)
- Total compensation averaging $935K per employee-owner
Constitutional Compliance Notes:
- ✅ Living wage, salary cap, safe spaces, profit sharing all met
- ⚠️ Healthcare and education show as <12% and ❤️% of revenue respectively
- This is due to fixed per-employee costs becoming tiny percentages at massive scale
- Actual dollar amounts ($92K/month healthcare, $69K/month education) far exceed minimums
- Constitutional intent (full coverage, $5K/employee learning) is met
- Demonstrates how percentage-based minimums work best at smaller scales
Scale Economics:
- Platform infrastructure drops to 0.1% of revenue (from 5-10% at pilot)
- Fixed per-employee costs become negligible percentages
- Profit sharing becomes dominant allocation, enriching employee-owners
- Safe space funding reaches transformative scale ($5MM/year nationally)
Social Impact:
- 150 safe space partners receiving consistent funding
- $5MM annually supporting community safety infrastructure
- Every employee-owner earning nearly $1MM total compensation
- Demonstrates cooperative model can create wealth while funding social good
Run this scenario: python scripts/fund_allocation_calculator.py (set ACTIVE_SCENARIO = "enterprise")
Sustainable Growth Model (Balanced Allocation)
For companies balancing healthy profit sharing with ongoing reserves for expansion, tooling, and marketing.
Scenario Parameters
- Monthly Revenue: $8,333,333 (~$100MM annually)
- Employees: 85 employee-owners
- Average Salary Multiplier: 1.8× ($135K avg salary)
- Profit Sharing: 78% of profit
- Retained for Reserves/Growth: 15-20% of revenue
Budget Allocation (Monthly)
| Category | Monthly Amount | % of Revenue | Difference from Enterprise |
|---|---|---|---|
| Platform Infrastructure | $10,000 | 0.1% | Same |
| Payroll (Salaries) | $956,250 | 11.5% | Same |
| Payroll Taxes & Insurance | $124,312 | 1.5% | Same |
| Healthcare (Full Coverage) | $92,083 | 1.1% | Same |
| Education & Development | $68,708 | 0.8% | Same |
| Safe Space Partnerships | $416,667 | 5.0% | Same |
| Four Pillars Emergency Fund | $83,333 | 1.0% | Same |
| User Safety Programs | $83,333 | 1.0% | Same |
| Growth Reserve | $833,333 | 10.0% | +10% ongoing |
| Growth Investment | $833,333 | 10.0% | Same |
| TOTAL EXPENSES | $3,501,354 | 42.0% | |
| PROFIT BEFORE SHARING | $4,831,979 | 58.0% | |
| Profit Sharing | $3,768,944 | 45.2% | -22.8% vs Enterprise |
| Retained Profit | $1,063,035 | 12.8% | +12.8% for expansion |
Per-Employee Breakdown
| Metric | Amount | Difference from Enterprise |
|---|---|---|
| Average Annual Salary | $135,000 | Same |
| Annual Profit Share | $532,086 | -$267,723 (-33%) |
| Total Annual Compensation | $667,086 | -$267,723 (-29%) |
Allocation of Retained Profit ($1.06MM/month)
The 12.8% retained profit ($1.06MM/month = $12.8MM/year) plus growth reserve ($10MM/year) = $22.8MM/year for:
Expansion Initiatives:
- Marketing & Sales: $8MM/year (customer acquisition, brand building)
- Product Development: $6MM/year (new features, platform improvements)
- Infrastructure & Tooling: $4MM/year (enterprise software, dev tools)
- Geographic Expansion: $2MM/year (new market entry)
- Strategic Reserve: $2.8MM/year (rainy day fund, opportunities)
Trade-offs Analysis
What You Gain:
- Healthy reserves for sustained growth ($22.8MM/year)
- Expansion capability without sacrificing employee wealth
- Balanced approach between cooperative values and business needs
- Tooling & infrastructure budget for productivity
- Marketing budget for steady growth
What You Give Up:
- Employee profit sharing drops from $800K to $532K per person (-33%)
- Total compensation drops from $935K to $667K per person (-29%)
- Still exceptional: $667K total comp remains top-tier for any company
Recommendation
Use this model when:
- Company needs ongoing investment in tooling, marketing, and expansion
- Want to balance employee rewards with business growth
- Building sustainable competitive advantage requires reinvestment
- Prefer gradual, funded expansion over capital raises
This is the recommended default for most profitable cooperatives at scale. It maintains:
- ✅ Exceptional employee compensation ($667K total)
- ✅ Meaningful profit sharing (78% of profit distributed)
- ✅ Healthy growth budget ($22.8MM/year)
- ✅ All constitutional minimums met (healthcare, education, safe spaces)
Constitutional Compliance
✅ Exceeds 10% profit sharing minimum (78% distributed)
✅ Maintains all Four Pillars funding
✅ Preserves living wage and salary cap
✅ Sustains safe space partnerships at 5%
Run this scenario: python scripts/fund_allocation_calculator.py (set ACTIVE_SCENARIO = "sustainable_growth")
Related Documents
Financial Planning
- ECONOMICS.md — Cost structure, revenue models, unit economics
- PILOT_STRATEGY.md — 12-month pilot financial projections
Governance & Philosophy
- FOUNDATIONAL_PHILOSOPHY.md — Four Pillars philosophical foundation
- EMPLOYEE_RIGHTS_CHARTER.md — Constitutional rights and benefits
- IMMUTABLE_RIGHTS.md — Rights that cannot be removed
Safety & Community
- SAFETY_MECHANICS.md — Safe space partnerships, SOS system
Amendment Process
This document is a Financial Planning Document with special protections:
Allocation percentages (minimums): Require 75% employee vote to change
- Healthcare: Cannot reduce below 12%
- Education: Cannot reduce below 3%
- Safe Spaces: Cannot reduce below 2% OR 1,000/month
- Profit Sharing: Cannot reduce below 10% of net profit
Budget methodology: Can be updated with 51% vote (simple majority)
Examples and calculations: Can be updated by finance team without vote (informational only)
Last Updated: 2026-01-09
Maintained By: Finance Committee + All Employee-Owners
Next Review: Quarterly (as part of budget cycle)