Fairly Exact Framework

Before implementing Fairly Exact, ensure these foundations are in place:

Essential Requirements

• Trust: Work only with people you genuinely trust
• Communication: Commit to radical transparency and documentation
• Alignment: All founders agree to the framework principles
• Value Focus: Track contributions by impact, not hours

Warning Signs

• Hesitation about transparency from any founder
• Insistence on hourly tracking over value creation
• Unwillingness to honor departed contributors
• Resistance to documented decision-making

A pre-formation ledger is a planning record only. It does not create an entity, ownership, membership, compensation right, intellectual-property transfer, liability protection, or authority to act for anyone else.

Solo Planning

A solo founder can document prototype work as blocks: define the milestone, record the contractor-equivalent scope proxy and stage, and preserve dated delivery notes. This creates a contemporaneous record for later review; it does not determine legal or tax treatment.

Before Anyone Else Contributes

Do not rely on Fairly Exact to define a relationship with another person. Before collaborative work begins, qualified legal and tax professionals must determine what entity, agreements, worker classification, compensation terms, intellectual-property terms, approvals, and filings are required.

If professionals approve the use of a pre-formation ledger, record only what their documents authorize. At formation, have the professionals determine whether and how any pre-formation record is reviewed, approved, and reflected in the LLC’s governing documents. Self-graded early blocks should be examined line by line by everyone whose interests could be affected.

Foundation Conversations

Before any implementation, have explicit discussions about:

• Trust and commitment to transparency
• Honoring all contributions, including departed members
• Handling disagreements constructively
• Documentation standards and practices

Review Core Materials

1. Read the Fairly Exact philosophy together
2. Review all principles as a team
3. Discuss how they apply to your specific situation
4. Document any company-specific interpretations

Complete Professional Review Before Anyone Joins

Fairly Exact v0 assumes an LLC-based implementation, but the framework does not prescribe the LLC’s tax classification, the legal or tax character of accepted units, admission documents, filings, or compliance steps.

Read the Legal and Tax Review and Dynamic Equity and Voting guides with qualified professionals. Complete the governing documents, admission process, intellectual-property documentation, voting rules, dispute process, and finalization mechanics they require before another person’s work enters the member ledger.

Establish Communication Rhythms

Regular Cadence

• Daily: Async updates on progress
• Weekly: Sync on active block progress
• Per Block: Planning session and retrospective
• Quarterly: Full equity review with all stakeholders

Set Up Infrastructure

Essential Tools

• Member ledger: Spreadsheet or dedicated tracking system
• Documentation: Central repository for all decisions
• Communication: Agreed channel for updates
• Governance: Formal record of member and manager approvals

Before minting anything, settle these and write down your reasoning. The numbered values are your team’s settings, not framework law - once set, changing them changes everyone’s math, so treat changes as a governance decision.

1. Your Founding Block

Not a number - a block. Size what the founders bring to the starting line (prior IP, an existing prototype, work already done, relationships in hand) using the same rubric as every other block. Itemize it as several blocks if there are several distinct things.

If you’re bringing an idea and little else, it’s a small block. That’s the correct answer. Founders hold their position by continuing to contribute, not by starting with a balance. See the Contribution Blocks guide.

2. The Rate (default: $5,000 per size point)

The scale of the sizing table: an M (size 10) fits a milestone worth ~$50,000. Set it against real contractor rates in your geography and domain.

Do not multiply this by your ledger balance. It prices block size, not ledger units. Minted units = size × stage multiplier, so at Stage 0 (×5) one ledger unit is about $1,000 of work, not $5,000.

The rate is a shared sizing yardstick, not a company valuation. It maps outside-cost estimates into the bounded catalog; catalog rounding and stage multipliers intentionally affect ownership. Set the rate once, use it consistently, and treat any change as a governance decision.

3. Your Stage Triggers

The observable event that moves you from each stage to the next. Decide these now, while nobody has a stake in the answer.

4. The Downside Split (default: 50/50)

How exit proceeds divide between cash and sweat until capital is made whole. See the Funding Blocks guide.

5. The LLC Implementation

Have qualified professionals prepare or approve the governing documents and procedures that give the ledger its intended effect. They must address admission, block acceptance, configured voting thresholds, disputes, departures, separate Funding Block and Advisor Block instruments, and both finalization paths.

If the corporate-conversion path will be modeled, choose a calculation share total (default: 10,000,000). That number is only a modeling input; it does not issue shares or complete a conversion.

Record the approved implementation decisions. No starting ledger balance or fixed earned percentage belongs on the list. The Contribution Block sizing formula does not require a company valuation.

Defining the Milestone

Your first block should have:

• Clear deliverable: Working prototype, launched website, first customer
• Realistic timeline: Typically 4-12 weeks
• Measurable outcome: Can be demonstrated or validated
• Documented scope: Written agreement on what constitutes completion

Sizing It

Estimate the contractor-equivalent scope proxy by asking what an outside contractor might charge to deliver the defined milestone. Divide the proxy by the unit rate and round to the nearest triangular size. The proxy is not the actual or complete value of the contribution.

At a $5,000 rate, a milestone you’d have paid roughly $30,000 for is an S block (size 6). At Stage 0 that mints 6 × 5 = 30 units.

Allocation

Example: Two Co-founders

Founding Block - a prototype and 4 months of prior work,
roughly $30,000 as a contractor-equivalent scope proxy
(S, size 6 × 5 = 30 units minted)
  - Technical Founder: 60% = 18 units
  - Business Founder:  40% = 12 units
  Ledger: 30 units. They own 100% of the work done so far.

Block 2 - Alpha release, roughly $50,000 of value
(M, size 10 × 5 = 50 units minted)
  - Technical Founder: 50% = 25 units
  - Business Founder:  30% = 15 units
  - First engineer:    20% = 10 units
  Ledger: 80 units.  Block 2 dilution: 50 / 80 = 62.5%
  Standing: Tech 53.8%, Biz 33.8%, Engineer 12.5%

Block 2 diluting the founders by 62.5% looks alarming until you notice the ledger only held 30 units. Early blocks move shares a lot because there isn’t much history yet. It settles quickly - by the time the ledger holds ~380 units, another 50-unit block moves shares by about 12% (50 / 430).

Every dilution figure above is quoted against a stated ledger size. Get in the habit now. A percentage without a denominator is not a fact.

Document all roles, responsibilities, and the rationale for percentages.

Block Planning Process

Before Each Block

1. Define clear milestone and success criteria
2. Size the block using the contractor-equivalent scope proxy
3. Determine contributor allocations based on expected roles
4. Document all decisions with rationale
5. Get explicit agreement from all participants
6. Record the stage multiplier in effect on the block’s activation date

During the Block

• Track progress against milestones
• Document any scope changes
• Note exceptional contributions
• Maintain regular communication

After Delivery

1. Assess milestone achievement
2. Review actual vs planned contributions
3. Apply ±10-20% adjustments for delivered work; allocate non-delivery to zero
4. Accept the final allocation and record the new member-ledger total
5. Communicate results to all stakeholders

Managing Changes

New Contributors

• Complete the admission, IP, and professional-review steps required by the governing documents before work enters the member ledger
• Pause acceptance when qualified professionals require review of a ledger change
• Begin the contributor at zero accepted units and explain how the ledger drives economics and voting

Departing Contributors

• End active voting eligibility but preserve accepted units
• Resolve any in-flight block at retro
• Preserve the departed contributor’s accepted-unit balance until finalization
• Do not infer a cash payout or other legal or tax result from the framework record

Funding Events

• Keep funding instruments and investors outside the member ledger during the dynamic period
• Track reimbursements and any negotiated funding terms separately
• Treat a priced institutional financing as a mandatory finalization trigger

Your First Priced Round

• This requires mandatory freeze and finalization. See the Freeze and Finalization guide.
• Resolve disputes, freeze the member ledger, calculate path-neutral percentages, and complete either FIXED_LLC or CORPORATE_CONVERSION with qualified professionals.

Documentation Standards

Every Block Should Have

• Milestone definition and success criteria
• The contractor-equivalent scope-proxy rationale
• Stage multiplier in effect at activation date
• Participant list with planned allocations
• Timeline and key deliverables
• Retrospective notes on actual outcomes, including any non-delivery
• The approval the operating agreement requires for the block

Common Pitfalls to Avoid

Block Sizing

• Sizing by gut instead of documenting the contractor-equivalent scope proxy
• Starting too large (use smaller blocks initially)
• Splitting a milestone into smaller blocks to farm units
• Forgetting to apply stage multipliers

Allocation Errors

• Basing splits on hours instead of value
• Using the ±10-20% band to paper over non-delivery
• Failing to recognize all contribution types

Ledger Errors

• Quoting a dilution percentage without its ledger size
• Changing the rate without recording why
• Treating team-set defaults as if they were framework law

Process Mistakes

• Skipping documentation “just this once”
• Making verbal agreements without writing
• Relitigating a stage transition after the fact
• Delaying difficult conversations

Legal Considerations

Essential Documents

• The LLC governing documents prepared or approved by qualified professionals
• Your adoption settings, recorded
• Governance approvals for each block and each stage transition
• The member ledger with full history
• Admission, IP-assignment, and professional-review references for every contributor
• Separate instruments for every Funding Block and Advisor Block
• Entity structure and entry documentation reviewed by qualified legal and tax professionals (see the Legal and Tax Review guide)

Regular Reviews

• Quarterly: Reconcile the member ledger, membership records, voting records, and separate instruments
• At the cadence professionals require: complete legal, tax, accounting, and compliance review
• Per funding: Test mandatory finalization and investor-document interaction
• On departure: End voting eligibility, convert to an economic interest, and resolve in-flight work
• Per accepted block: Recalculate the hypothetical final allocation

The system works best when teams spend 15 minutes agreeing rather than 2 hours optimizing. Perfect allocations don’t exist - good enough allocations that everyone supports do.

“We’re not tracking hours or assigning labor points. We’re recognizing completed value creation by contributors building something meaningful together.”

Key Rules:

• The ledger contains nothing but blocks - including the founders’ starting position
• Size blocks using a contractor-equivalent scope proxy for the defined milestone
• Use triangular block sizes (1/3/6/10/15/21); minted units = size × stage multiplier
• Your stage sets the multiplier (not per-block negotiations)
• Plan percentages, then accept final units at retro (normally within ±10-20% for delivered work)
• Block size stays fixed once chosen
• Mis-sized work? Use a micro follow-on block

The founders’ starting position is a block, sized like every other block. There is no separate founding allocation, no starting balance, and no magic number.

Estimate the same contractor-equivalent scope proxy used for any milestone: what might an outside contractor charge to deliver what was brought to the starting line? The proxy does not claim to measure the work’s actual or complete value.

• Pre-existing IP or a working prototype
• Work completed before adopting the framework
• Customer, partner, or hiring relationships already in hand
• A brand, a design system, a body of research

Itemize it as several blocks rather than one lump - one per distinct thing you’re claiming. It’s easier to agree on, and far easier to defend later.

If You Brought an Idea and Nothing Else, It’s a Small Block

That is the correct answer, not a harsh one.

An idea that hasn’t been built, tested, or sold is worth very little of what a contractor would charge, because almost none of the work has happened yet. A framework whose whole premise is that ownership should track contribution cannot then exempt the founders from it.

Anti-Dilution Is Participation

This is the design, stated plainly:

Founders don’t hold their position through a structural advantage. They hold it by continuing to contribute.

A founder who keeps working keeps delivering Contribution Blocks and earning accepted units—at Stage 0’s ×5, then ×4, then ×3, at every stage the company passes through. Their share compounds through participation. A founder who stops contributing dilutes because other people continue delivering work.

That’s not a flaw to be patched. It is the entire point. The framework’s opening complaint is about people who “walk away with more than their share for showing up first” - and a protected founding balance would rebuild exactly that.

Why There’s No Starting Balance

It’s tempting to give founders an opening balance so the ledger doesn’t start at zero. Don’t - it breaks the framework in two ways.

It smuggles in a valuation. The rate prices work in dollars. A starting balance is denominated in units. Put both in the same system and the rate stops cancelling - it becomes a forced exchange rate between “the founding position” and “labor,” which is a valuation of the company at the exact moment nobody can possibly know one.

The Contribution Block sizing formula does not require a company valuation. The rate translates a contractor-equivalent scope proxy into the bounded size catalog; the stage multiplier then recognizes earlier risk. Member-ledger allocations therefore reflect catalog-sized, risk-weighted contribution rather than raw dollars. Catalog rounding and stage weighting are deliberate parts of the result, not claims about what the company or a person’s complete contribution is worth.

And it solves a problem that sizing already solves. The failure it appears to prevent - first block 100%, second 75%, third 60% - only happens if each block is bigger than everything before it, which is what you get by walking up the size catalog in order. Size against real work instead, and a steady team’s shares settle on their own:

Yes, the first block is 100% of the ledger. At that moment it is 100% of the work anyone has done. That’s arithmetic being correct, not a bug.

When This Framework Is the Wrong Tool

Worth saying out loud: if your venture’s value genuinely sits in novel, defensible IP rather than in execution, this is not your framework. Use conventional founder equity with a proper IP assignment.

Most ventures aren’t that, and honest founders know which one they’re in. Fairly Exact doesn’t need to be everything to everyone.

Block size is not a gut call. It uses the documented cost of comparable outside delivery as a shared scope proxy.

The Unit Rate

Pick the size whose estimated outside-delivery cost matches what the team would have paid an outside party for comparable scope.

Default rate: $5,000 per size point. Set this once at adoption and document it. Contractor rates vary enormously by geography and domain, so this is a starting point, not a law of the framework.

The size number is an input, not a holding. Nobody owns a 10. A size-10 block at Stage 0 mints 10 × 5 = 50 units, and those 50 units are what enters the ledger.

The size points themselves are linear, but rounding into a bounded catalog is necessarily approximate. Splitting or merging work can therefore change the final point count near a catalog boundary. Do not choose block boundaries to optimize units: each block must be an independently deliverable milestone, and its outside-cost estimate must be documented before work begins.

The Conservation Law

size          = contractor-equivalent scope proxy ÷ rate   (rounded to the catalog)
units minted  = size × stage multiplier

This is what anchors the denominator. Sizing a block means agreeing on a comparable outside-delivery cost—a proxy everyone can check and challenge before work begins. It is not the milestone’s complete business, social, or moral value. Without a shared proxy, whoever sizes blocks quietly controls the denominator.

Hours are still not counted. The proxy sizes the scope; delivery and team judgment determine acceptance and final allocation.

The Rate Is a Yardstick, Not a Valuation

The rate matters when the team maps the contractor-equivalent scope proxy to the bounded catalog. It is not a company valuation.

Use one documented rate consistently. Changing it moves the boundaries between catalog sizes and can change future grants, so a rate change is a governance decision rather than a harmless recalibration.

The rate is a shared yardstick for relative judgment, not a valuation. It exists to make “was that milestone bigger than this one?” an answerable question instead of an argument.

The ledger still contains only blocks. Add a fixed starting balance denominated in units and the system would need an exchange rate between that balance and future work - see The Founding Block.

This Is Not a Unit Valuation

The rate prices block size, which prices the work. It says nothing about what a ledger unit is worth — and as shown in the previous section, a ledger unit has no fixed dollar value anyway, because the multiplier changes the exchange rate by stage.

Fairly Exact defines an allocation calculation, not the legal or tax characterization of an associated interest. Qualified professionals must determine that characterization and the governing documents, filings, and compliance it requires. See the Legal and Tax Review guide.

Once the block is sized, splitting it should be quick:

1. List the key outcomes needed for this milestone (2 min)
2. Match people to outcomes based on roles (1 min)
3. Propose rough percentages (1 min)
4. Quick gut check - does this feel right? (1 min)
5. Document and confirm (done!)

Automatic Risk Adjustment

Your company stage determines the multiplier - no per-block decisions needed:

Base units price the work. The multiplier prices the risk of having done that work when the outcome was still uncertain. They do different jobs and don’t double-count.

Example Impact

An M block (size 10) at different stages:

• Stage 0: 10 × 5 = 50 units (high-risk founding work)
• Stage 2: 10 × 3 = 30 units (early market validation)
• Stage 4: 10 × 1 = 10 units (mature operations)

Important: The multiplier is about the company’s stage, not individual timing. A new engineer joining during Stage 0 gets the same 5× multiplier as the founders. Everyone contributing during a high-risk stage shares that stage’s multiplier.

Pre-Commit Your Stage Triggers

A stage change makes all future work worth 20-25% less. If nobody agrees in advance what triggers it, you’ve built a standing argument into the framework - and two people doing identical work a week apart get different multipliers for no defensible reason.

Write down the observable event for each transition at adoption time, before anyone has a stake in the answer. Examples teams have used:

• 0 → 1: a working prototype in the hands of someone outside the team
• 1 → 2: first paying customer
• 2 → 3: a revenue or profitability threshold the team picks now
• 3 → 4: a ledger-weighted member vote

Pick triggers you can point at, not ones you’d have to argue about.

Stage-Timing Rules

1. A block carries the multiplier in effect on its activation date, recorded when the block moves from open to active. It never changes retroactively, even if the stage shifts mid-block.
2. Stage changes take effect on the date the trigger is met, recorded by the approval the operating agreement requires.
3. Stage changes are never backdated.

These rules prevent retroactive rewrites, but they still depend on honest scoping. A block has started only when its scope is approved and substantive work has begun; opening paperwork early does not preserve a multiplier. If a block is deliberately scoped to straddle a known upcoming stage trigger, split it into independently deliverable pre- and post-trigger blocks.

The Only Correct Statement

dilution = minted units ÷ (existing ledger + minted units)

Dilution is never a property of block size alone. The same block dilutes differently depending on how big the ledger already is. Any percentage quoted without its denominator is meaningless - that’s true here and it’s true in every cap table you’ll ever read.

The Same Block, Three Different Answers

An M block at Stage 2 mints 10 × 3 = 30 units. What does it dilute?

Same size. Same catalog. Same stage. Twenty times the spread - because the denominator moved.

Internalize this. It’s the single most important thing in this guide, and it’s why the framework refuses to publish a table of “what each block size dilutes.” No such table can exist.

The Ledger Grows, So Blocks Dilute Less

That’s not a defect either. A steady team contributing steadily sees each block’s impact shrink:

Everyone’s share converges toward their share of catalog-sized, risk-weighted contribution, which is exactly what the framework is for.

Prefer Short Blocks

XL (size 21) is the maximum block size. If a body of work exceeds XL, decompose it before work begins into multiple independently deliverable milestones, each with its own acceptance criteria and allocation. Do not invent a custom size above the catalog.

This is an intentional limit on the guess horizon, not a claim that the total body of work is worth only $105,000. Shorter blocks mean tighter delivery loops, smaller exposure if someone doesn’t deliver, and more frequent chances to correct an allocation that turned out wrong. The framework’s error correction only runs as often as you close blocks.

Units Enter the Ledger Only at Acceptance

Opening a block records planned allocations; it does not mint ledger units. Units enter the member ledger only after the milestone is delivered, reviewed at retro, and accepted.

Accepted units are entries in the member ledger. The framework does not determine their legal or tax characterization. Pause acceptance whenever qualified professionals require review of a ledger change. See the Legal and Tax Review guide.

The ±10-20% Band Is for Delivered Work

At retro, allocations can move by ±10-20% to reflect how the work actually landed. Someone carried more than expected; someone else less. That’s normal, and the band handles it.

The band applies to variance in work that was delivered. It does not apply to work that wasn’t.

Non-Delivery Is Not an Adjustment

A participant who doesn’t deliver their committed scope may be allocated zero accepted units for that block.

This isn’t a penalty or clawback. Unaccepted work never entered the ledger. The ledger records what happened.

Without this, someone could take 60% of a large block, deliver half, get trimmed to 48% by the band, and keep it permanently. That’s the “showing up first” problem this framework exists to solve, reproduced one level down.

Leaving Mid-Block

An in-flight block receives zero or partial accepted units at retro, depending on what was actually delivered. Accepted blocks are untouched.

Retro Adjustments Are Ledger Entries

An upward retro adjustment changes accepted ledger units under the same operating-agreement rules as any acceptance. Record the final allocation and its rationale, then recalculate the hypothetical final allocation.

1. The ledger is nothing but blocks - including the founders’ starting position
2. Document the contractor-equivalent scope proxy - estimate comparable outside delivery and divide by the team-set rate
3. Use triangular sizes - 1/3/6/10/15/21; minted units = size × multiplier
4. Stage sets multiplier - not a per-block negotiation
5. Pre-commit stage triggers - decide them before they’re worth arguing about
6. Pre-allocate percentages - split blocks by role contribution
7. ±10-20% adjustment band - for delivered work only; non-delivery goes to zero
8. Prefer short blocks - break big milestones up; error correction happens at retro
9. Block size stays fixed - once chosen, don’t change it
10. Define roles upfront - Build, Sell, Manage, Maintain
11. Spend minutes, not hours - 15-minute allocations beat 2-hour debates
12. Never quote a percentage without its ledger size - dilution has a denominator, always
13. Anti-dilution is participation - keep contributing, keep minting
14. Document decisions - not endless discussions

Remember: the triangular catalog is memorable, but the ledger is what’s real. Trust the process over multiple blocks.

Fairly Exact keeps cash outside the member ledger through two connected records:

1. Cash ledger: Records dollars and the status of reimbursements or capital.
2. Funding Block: Records the business terms under discussion and references a separate professionally prepared instrument.

Neither record creates repayment, downside, upside, voting, or ownership rights by itself. Only accepted Contribution Blocks mint member-ledger units.

Not all cash entering a company has the same purpose. The framework records two business categories while leaving their legal, tax, and accounting treatment to qualified professionals.

Reimbursements

Small operational expenses can be recorded in the cash ledger:

• Record the amount, purpose, contributor, date, and supporting evidence.
• Keep the amount outside the member ledger.
• Use a team-set threshold (default: $5,000) to trigger a review, not an automatic conversion.
• Have qualified professionals determine whether and how the amount may be repaid, converted, or otherwise treated.

Capital

An intentional cash injection opens a Funding Block:

• Record the amount, purpose, proposed business terms, approvals, and instrument reference.
• Do not apply a Contribution Block size or stage multiplier.
• Do not mint member-ledger units.
• Have qualified professionals prepare or approve the separate instrument before relying on any repayment, downside, upside, voting, or ownership term.

The distinction keeps cash visible without allowing a ledger entry to masquerade as a financing agreement.

Cash has an exact recorded amount, while work is sized through a contractor-equivalent scope proxy and accepted after delivery. That difference makes a separate negotiation more honest than forcing both into one formula.

Before recording proposed funding terms, ask:

1. What problem does the cash solve?
2. Can the need be reduced, delayed, or met through revenue or another arrangement?
3. What amount is actually required?
4. What downside, upside, repayment, or conversion expectations does each party have?
5. Which qualified professionals will document and review the agreement?

Company stage can inform the conversation, but the Contribution Block multiplier does not apply to Funding Blocks.

Fairly Exact offers a team-set negotiating position for discussing a distressed outcome:

proposed cash recovery = min(configured split × proceeds, recorded capital)

At the default 50% split, the proposal would divide proceeds between cash and sweat until recorded capital is made whole. This is a business discussion aid, not an automatic entitlement, distribution rule, liquidation preference, or complete financing model.

The configured split is a starting point for negotiation. A separate professionally prepared instrument must define the complete treatment, priority, denominator, dilution, and interaction with other interests and obligations.

Funding Blocks, outside investments, and other financing arrangements do not receive units in the member ledger, do not enter ledger-weighted voting, and do not participate in its final allocation.

The Funding Block record should contain:

• the cash-ledger entry or entries involved;
• proposed terms and negotiation history;
• required governance approvals;
• the separate instrument reference;
• professional-review references; and
• the status of the arrangement at finalization.

Do not describe a Funding Block as minted. Record or open the Funding Block; only acceptance of a delivered Contribution Block mints member-ledger units.

A priced financing is one mandatory finalization trigger, but it is not the only one. At the earliest trigger:

1. Resolve Contribution Blocks and freeze the member ledger.
2. Calculate each contributor’s frozen member-ledger percentage.
3. Have qualified professionals implement the selected fixed-LLC or corporate-conversion path.
4. Reconcile each Funding Block and outside financing instrument under its own terms.

The member-ledger final allocation does not silently absorb or resolve separate funding arrangements.

Would the proposed business terms still feel fair if the parties’ positions were reversed?

Document the answer, the assumptions, and the professional review. Transparent negotiation is more useful than pretending the framework supplies a universally correct financing formula.

Advisor Blocks record external value provided by someone who is not participating in day-to-day Contribution Blocks.

Appropriate uses

• ongoing strategic advice;
• a specific introduction that produces a documented outcome;
• contributed intellectual property or specialist expertise;
• validation, mentorship, or other defined external support.

Use another record for

• active Build, Sell, Manage, or Maintain work: use a Contribution Block;
• cash or assets: use the cash ledger and a Funding Block; and
• ordinary paid services: use the documents and records qualified professionals require.

An Advisor Block is a contribution record, not an ownership grant or legal agreement.

Advisor arrangements are commonly discussed using a target percentage or another negotiated economic term. Fairly Exact may record that proposed target, but it does not convert the target into member-ledger units.

Record:

• the specific value or outcome expected;
• whether the work is one-time or ongoing;
• the proposed target percentage or other business term;
• any conditions, duration, or delivery milestones;
• required governance approvals;
• the separate instrument reference; and
• professional-review references.

The separate professionally prepared instrument must define the denominator, dilution, vesting or earning conditions, legal and tax treatment, and what happens at finalization. Do not describe an advisor target as a permanent percentage or as part of member-ledger ownership.

Use transparent questions rather than a member-ledger conversion formula:

1. What specific value is being provided?
2. Is the value delivered once or over time?
3. What observable outcome demonstrates delivery?
4. Is the proposed business term understandable without hidden assumptions?
5. How will future changes, dilution, departure, and finalization be handled by the separate instrument?
6. Which qualified professionals will prepare and review it?

Market examples may inform a negotiation, but they are not Fairly Exact defaults and should not be presented as universally appropriate terms.

Keep roles and records separate:

• An advisor does not enter the member ledger merely because an Advisor Block exists.
• If an advisor later becomes an active contributor, complete the admission and professional-review process required by the governing documents before opening Contribution Blocks for that work.
• Past advisory activity remains attached to its Advisor Block and separate instrument.
• New Build, Sell, Manage, or Maintain work is delivered and accepted through ordinary Contribution Blocks.

The Contribution Block stage multiplier never applies to an Advisor Block. Any recognition of timing or risk belongs in the separately negotiated business terms.

Advisor Blocks do not mint member-ledger units, enter ledger-weighted voting, or participate in the member-ledger final allocation.

At a mandatory finalization trigger, freeze the member ledger independently. Then have qualified professionals reconcile each advisor instrument according to its own terms. The Advisor Block preserves what was promised and delivered; it does not determine how the promise becomes legally effective.

Do

• define the contribution and observable outcome;
• document the proposed business term and its assumptions;
• require the approvals established by the governing documents;
• obtain intellectual-property documentation when professionals require it;
• keep the instrument reference with the Advisor Block; and
• keep Advisor Blocks outside the member ledger.

Do not

• quote member-ledger units for an advisor;
• imply that a target percentage is permanent or self-executing;
• promise economics without a professionally prepared instrument;
• mix advisory and active contributor work in one record; or
• treat vague access or hypothetical future value as delivered contribution.

Fairly Exact is not legal, tax, accounting, investment, employment, or financial advice. It is an experimental planning, calculation, and recordkeeping framework.

Fairly Exact v0 assumes an LLC-based implementation, but the framework does not create an entity, admit members, issue interests, transfer intellectual property, authorize voting or distributions, or satisfy any filing or compliance requirement. Those effects can come only from governing documents and procedures prepared or approved for the specific company, participants, transactions, and jurisdictions by qualified legal and tax professionals.

The operating method is designed to be simple. Its implementation is not legally self-executing. Do not treat the ledger, a block record, a vote result, or a generated allocation as a legal instrument.

Bring the framework’s actual rules and formulas to qualified professionals. Ask them to prepare or approve documents that address:

• entity formation, ownership records, and the process for admitting each contributor;
• the legal and tax characterization of any interest associated with accepted units;
• intellectual-property assignment, confidentiality, and authority to bind the company;
• how blocks are opened, activated, delivered, disputed, accepted, and recorded;
• which approvals apply to admissions, blocks, voting matters, amendments, departures, and finalization;
• the configured approval threshold for each voting matter and the treatment of abstentions;
• what a departure does to legal rights while preserving the framework’s accepted-unit balance;
• how disputes and alleged misconduct are resolved without improvising a forfeiture;
• how Funding Blocks and Advisor Blocks remain outside the member ledger and connect to separate instruments;
• whether and how allocations, payments, or distributions may occur during the dynamic period; and
• how a mandatory finalization produces fixed LLC interests or a corporate conversion.

This is a statement of outcomes the framework needs, not a recommendation of clauses, forms, elections, filings, or legal conclusions.

The professional review should answer, in writing:

1. Is the proposed LLC structure appropriate for the company, participants, and jurisdictions involved?
2. What documents and approvals are required before a contributor begins participating in the member ledger?
3. How should accepted units be characterized, issued, recorded, and reported?
4. What tax classification, reporting, withholding, and payment obligations apply to the company and each participant?
5. Could participants have tax liabilities without receiving cash, and should the governing documents address that risk?
6. What employment, worker-classification, compensation, benefits, and wage requirements apply?
7. What securities, fiduciary, disclosure, or consent requirements apply to the interests and separate instruments?
8. How should Funding Blocks, Advisor Blocks, reimbursements, and outside investment be documented outside the member ledger?
9. Which approval thresholds and dispute procedures are enforceable and appropriate?
10. What documentation and professional work are required for each finalization path?

The framework should not supply the answers. Record the answers and references provided by the professionals responsible for the implementation.

The software can preserve evidence and calculations without claiming that the evidence creates legal compliance. Keep references to:

• professional review and the version of the governing documents in effect;
• admission and intellectual-property documents;
• each block’s scope, contractor-equivalent scope proxy, stage, planned allocation, delivery record, final allocation, and approval;
• configured voting thresholds, record dates, eligible units, instructions, and outcomes;
• disputes, resolutions, departures, and any professionally authorized remedy;
• separate Funding Block and Advisor Block instruments; and
• the finalization approval, frozen ledger, selected path, and closing records.

The member ledger is the framework’s allocation and governance record. Its legal effect depends on the governing documents and professional implementation behind it.

Do not rely on Fairly Exact alone to:

• form an entity or admit a member;
• promise or issue an ownership interest;
• accept cash or advisor services in exchange for future economics;
• determine tax treatment, reporting, withholding, or filing deadlines;
• classify a worker or determine compensation obligations;
• authorize a distribution, financing, sale, or conversion; or
• resolve a dispute or take away an accepted interest.

Pause the affected action until qualified professionals have supplied the required documents, decisions, and approvals. A complete ledger is evidence of the framework’s process, not a substitute for professional work.

The member ledger is Fairly Exact’s allocation and governance record. It contains only units minted by accepted Contribution Blocks. Funding Blocks, Advisor Blocks, reimbursements, and other obligations remain outside it and connect to separately prepared instruments.

The ledger’s legal effect depends entirely on governing documents and procedures prepared or approved for the specific company. The framework and software calculate and record allocations; they do not create an entity, admit a member, issue an interest, authorize a vote, or authorize a distribution.

A contributor begins at zero accepted units only after the admission, intellectual-property, and professional-review steps required for that company have been completed and recorded.

Contribution Blocks follow one lifecycle: open → activate → deliver → accept. Acceptance mints the approved allocation into the member ledger and marks the block MINTED. A block that is not delivered or accepted receives a zero allocation. “Forfeiture” is reserved for an expressly documented misconduct remedy.

The framework does not authorize discretionary distributions during the dynamic period. A contemplated discretionary distribution triggers finalization first. Qualified professionals must design any tax distributions, allocations, or exceptions in the governing documents.

Each voting matter stores its own approval threshold. The default threshold is more than 50% of all eligible voting units; governing documents may specify a different threshold.

For each matter:

1. Establish the record date and eligible voting units under the governing documents.
2. Include active contributors’ accepted, undisputed member-ledger units. Exclude departed contributors, disputed units, Funding Blocks, and Advisor Blocks.
3. Count missing instructions as abstentions.
4. Return APPROVED when FOR exceeds the configured approval threshold.
5. Return REJECTED when AGAINST exceeds the configured approval threshold.
6. Return STATUS_QUO when neither side exceeds the threshold, including ties and abstention-driven non-decisions.

Archive the threshold, eligibility record, instructions, tally, and result. The framework records the calculation; governing documents determine whether and how it has legal effect.

A departed contributor retains the balance of accepted units shown in the member ledger. Later accepted Contribution Blocks may change that balance’s percentage of the total.

Departed contributors are excluded from interim voting calculations. Pending work still follows the normal delivery and acceptance process. The governing documents and qualified professionals must determine the legal, tax, economic, and administrative consequences of departure; the framework does not supply those conclusions.

The ledger freezes and finalization begins at the earliest documented trigger, which may include:

• a priced financing;
• an acquisition, merger, dissolution, or other liquidity event;
• sustainable ability to pay market compensation;
• a material capital or allocation change that should not continue under the dynamic method;
• a contemplated discretionary distribution; or
• a declaration approved using the configured approval threshold.

Before finalization, resolve pending and disputed Contribution Blocks under the documented acceptance process. Then calculate path-neutral frozen percentages from all accepted Contribution units, including accepted units held by departed contributors.

The team then selects FIXED_LLC or CORPORATE_CONVERSION. Either path requires professional execution. See Freeze and Finalization for the distinct requirements.

Maintain a clear audit trail for contributor admission, IP assignment, professional review, each block lifecycle event, acceptance, allocations, votes, departures, and finalization.

Reconcile the member ledger regularly, preserve immutable voting snapshots, and test entry, departure, disputes, abstentions, ties, and both finalization paths before adoption and after rule changes. Reconcile the cash ledger and separate instruments independently; never include them in member-ledger calculations.

The operating method is designed to be simple. Its implementation is not legally self-executing.

Fairly Exact is a temporary operating method. Finalization begins when a documented trigger occurs, including a priced financing, acquisition, merger, dissolution, liquidity event, sustainable market compensation, a material capital or allocation change, a contemplated discretionary distribution, or a declaration that exceeds the configured approval threshold.

Funding and Advisor arrangements remain outside the member ledger. Their separate instruments may affect transaction planning, but they do not alter the member-ledger calculation.

Once finalization begins:

1. Stop opening and activating Contribution Blocks.
2. Resolve every pending, active, and disputed Contribution Block under the documented delivery and acceptance process.
3. Verify that every member-ledger unit traces to an accepted Contribution Block and allocation.
4. Include accepted units held by active and departed contributors in the final denominator.
5. Freeze the member ledger using the approval and documentation required by the governing documents.

Only the member ledger freezes. The block records remain an immutable history of their lifecycle and outcomes. The system must not produce a completed final allocation while a Contribution Block dispute remains unresolved.

First calculate each contributor’s frozen percentage:

accepted contributor units ÷ total accepted Contribution units

This calculation is the same for both paths. It excludes Funding Blocks, Advisor Blocks, reimbursements, negotiated target percentages, and separate-instrument amounts. Preserve the inputs, denominator, percentages, and rounding record as the final member-ledger certificate.

FIXED_LLC records the frozen percentages as the final allocation state for an LLC-based implementation. It requires no conversion share count or conversion filing reference. The governing documents, approvals, and procedures needed to give that state legal effect must be prepared or approved by qualified professionals.

CORPORATE_CONVERSION uses the same frozen percentages and then allocates a selected whole-share total by largest remainder. This path requires the conversion share total and applicable filing references in the framework record. Qualified professionals must determine the entity, documents, approvals, filings, interest treatment, tax treatment, and transaction steps.

The software distinguishes the resulting states: fixed-LLC finalization is FINALIZED_LLC; completed corporate conversion is CONVERTED. Neither status asserts legal or tax compliance on its own.

Before marking finalization complete:

• record the selected path, trigger, frozen member-ledger total, percentages, approvals, and professional-review references;
• for CORPORATE_CONVERSION only, record the conversion share total, whole-share allocation, and required filing references;
• reconcile the cash ledger without adding cash to member-ledger units;
• identify Funding Block and Advisor Block instruments that require separate action;
• identify any distribution, allocation, financing, IP, employment, securities, filing, or compliance work for qualified professionals; and
• archive the final certificate and supporting evidence.

Fairly Exact supplies planning, calculation, and recordkeeping tools. It does not complete either finalization path.

The frozen member ledger becomes a historical record explaining how the allocation developed. It no longer changes after finalization.

The governing documents and professionally executed transactions determine ownership, voting, distributions, future issuances, and other legal or tax effects after that point.

Member ledger — The framework’s allocation and governance record of units minted by accepted Contribution Blocks, including the founders’ starting position. Its legal effect depends on professionally prepared governing documents.

Unit — One entry in the member ledger. A unit has no fixed dollar value because the stage multiplier changes how much contractor-equivalent scope one unit represents. Qualified professionals must determine the legal and tax characterization of any associated interest.

Accepted units — Units that entered the member ledger because a Contribution Block was delivered, reviewed at retro, and accepted. Only accepted units count in member-ledger allocations or voting calculations.

Minted units — The units a block creates: block size × stage multiplier. Units are minted only at acceptance, never when a block opens.

Pre-formation ledger — Blocks tracked before the LLC-based implementation is professionally completed. It is a planning record only and creates no ownership or other legal rights by itself. See Getting Started.

Pre-formation contribution documentation — Any documents qualified professionals require before multiple people contribute to an unformed venture. Fairly Exact does not provide or prescribe those documents.

Hypothetical final allocation — The permanent ownership each member would receive if the ledger froze right now. Recalculated and published after every accepted block so finalization never surprises anyone.

Dilution — minted ÷ (existing ledger + minted). Never a property of block size alone; a percentage quoted without its ledger size is meaningless.

Block — A structured record. Contribution Blocks describe milestone-scoped work; Funding and Advisor Blocks reference separate arrangements. Only acceptance of a delivered Contribution Block mints member-ledger units.

Contribution Block — The standard block for work: Build, Sell, Manage, or Maintain. Sized using a contractor-equivalent scope proxy and multiplied by stage.

Founding block — The founders’ starting work, sized like every other Contribution Block using a contractor-equivalent scope proxy. There is no separate founding allocation or starting balance.

Funding Block — A record of a negotiated cash arrangement. Cash is tracked in the cash ledger, while any repayment, downside, or upside terms belong to a separate professionally prepared instrument outside the member ledger.

Advisor Block — A record of external value such as introductions, IP, advice, or validation. Any target percentage or other economics belong to a separate professionally prepared instrument outside the member ledger.

Block size / size point — The catalog number (1, 3, 6, 10, 15, or 21) chosen by dividing a milestone’s contractor-equivalent scope proxy by the unit rate. An input to minting, not a holding - nobody owns a size.

Triangular catalog — The bounded set of block sizes: Micro 1, XS 3, S 6, M 10, L 15, XL 21. XL is the maximum; bigger work must be decomposed.

Unit rate — The team-set dollars of contractor-equivalent scope proxy per size point (default $5,000). A shared sizing input, not a company valuation or a price per ledger unit.

Stage / stage multiplier — The company’s phase (0-4) and the risk multiplier it sets (×5 → ×4 → ×3 → ×2 → ×1). A Contribution Block carries the multiplier in effect on its activation date.

Stage trigger — The observable event, pre-committed at adoption, that moves the company from one stage to the next.

Retro — The review after delivery where the team confirms what was delivered and finalizes allocations for acceptance.

Adjustment band — The ±10-20% range by which a retro can move a participant’s planned allocation to reflect how delivered work actually landed. It never covers non-delivery.

Non-delivery — Committed scope that wasn’t delivered. Allocated zero accepted units at retro - not a penalty, just the ledger recording what happened.

Micro follow-on block — A size-1 block used to correct a mis-sized milestone after the fact, instead of reopening a closed block.

Member — A participant admitted to the LLC through the process and documents established by qualified professionals. Fairly Exact does not admit members by itself.

Contributor — A member doing Build, Sell, Manage, or Maintain work through Contribution Blocks.

Admission document — The documentation qualified professionals require to admit a participant to the LLC and bind that participant to its governing terms.

Operating agreement — The LLC’s governing contract and the framework’s legal home. It adopts the ledger’s rules - block acceptance, voting, departure, disputes, and mandatory finalization - and makes them binding.

Departed contributor — A member whose participation ended. Their accepted units stay fixed, keep diluting, and return at finalization; their position becomes a non-voting economic interest in the meantime.

Retained accepted-unit balance — The framework record preserved for a departed contributor. It remains in final-allocation calculations but carries no interim voting weight; governing documents determine its legal effect.

Ledger-weighted voting — Member voting where each active contributor votes their accepted, undisputed units directly. Missing votes abstain; a tie preserves the status quo.

Record date — The date as of which eligible units are snapshotted for a vote.

Ledger certificate — The signed statement of accepted units as of a record date, required before any vote is certified.

Dispute process — The professionally prepared, time-boxed process for resolving block disputes so an unresolved dispute cannot indefinitely stall finalization.

Configured approval threshold — The share of eligible voting units a side must exceed for a voting matter. The framework default is 50%, meaning approval requires more than half of all eligible units; governing documents may specify another threshold.

Cash ledger — The separate record of cash and asset movements. Never mixed into the member ledger.

Reimbursement — A recorded operational expense fronted by a participant. A separate professionally reviewed arrangement determines whether and how it is repaid.

Reimbursement threshold — The team-set balance (default ~$5,000) that triggers review of accumulated cash records and whether a Funding Block or another separate arrangement is appropriate.

Capital contribution — An intentional cash injection recorded in the cash ledger and connected to a Funding Block. The separate instrument determines its treatment.

Downside split / downside sharing — An optional framework negotiating position for discussing how cash and contribution might share downside. It is not an automatic entitlement or complete financing model and has no effect without a separate professionally prepared instrument.

LLC (limited liability company) — The entity type assumed by Fairly Exact v0. Qualified professionals must determine its governing documents, tax classification, interest design, filings, and compliance requirements.

Professional review reference — A stored reference showing which legal or tax professional reviewed an implementation decision. It records evidence; it does not establish compliance.

Admission document reference — A stored reference to the documents used to admit a contributor under the governing documents.

Capital-shift review — A required professional review before accepting a block when the company has meaningful existing value. The framework does not determine the resulting legal or tax treatment.

Capital-shift gate — The framework trigger reached when qualified professionals determine that continuing dynamic allocations would require legal, tax, or accounting machinery the team will not operate. Reaching the gate requires finalization.

Freeze — The moment the member ledger permanently stops changing: no new Contribution units, every Contribution Block dispute resolved, denominator fixed. Existing block records remain as history.

Finalization — The mandatory process that freezes the member ledger and uses its percentages as the basis for permanent ownership through a professionally implemented fixed-LLC or corporate-conversion path.

Finalization trigger — An event that makes freeze and finalization mandatory: a priced financing, a liquidity event, sustainable market compensation, the capital-shift gate, or a ledger-weighted member declaration.

Corporate conversion — One possible finalization path. Qualified professionals determine the entity, transaction, documents, filings, and resulting interests.

Conversion share total — The team-set calculation input used to model whole-share allocations if qualified professionals implement the corporate-conversion path.

Largest remainder — The deterministic rounding method for allocating whole shares proportionally: everyone gets their whole-number share, and leftovers go to the largest fractional remainders, with ties broken by a documented rule.