Glossary

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.

Eligible-ledger snapshot — The voter list and voting units Fairly Exact calculates and saves when voting opens. Later ledger changes cannot alter that vote’s snapshot.

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.

Bound matter — A voting matter tied to the state change it decides, so that passing it performs the change. A general matter is bound to nothing: it records a result without moving anything.

Governance policy — The record of which transitions require a passing matter and at what threshold. Amending it is itself a matter, judged under the policy in force when that matter opened.

Founding act — A gated transition recorded without a vote before the ledger had ever minted units, when no matter could have taken an eligibility snapshot. It covers a company’s first block, is marked on the record, and does not become available again if a mature ledger later has no eligible voters.

Cash ledger — The separate record of what members put in for the company and how each member’s balance is resolved. It does not record the company’s own balance, revenue, or spending. Never mixed into the member ledger.

Expense — Money a member paid on the company’s behalf. It adds to that member’s balance.

Cash contribution — Cash a member gave the company directly without opening a Funding Block. It adds to that member’s balance.

Balance — A member’s expenses and cash contributions not yet reimbursed or converted. Resolved per member, by amount, in whole or in part.

Reimbursement — Paying a member back from company money. It reduces their balance.

Conversion — Moving some or all of a member’s balance into a Funding Block, at any amount. A vote by default.

Funding Block minimum — The team-set amount (default $5,000) at or above which cash put in can open a Funding Block directly. Below it, cash goes through the member’s balance.

Capital contribution — An intentional cash injection of at least the Funding Block minimum that the member chose to record as 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.