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
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
- CALCULATOR.md — Python calculator and sensitivity analysis tools
- 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)