tell something about earning allocated or stated fractional basis?

Answer 1

There was this slide that came up in an internet search. It says "Three Frequently used Methods of Share Earnings"--then it lists two (fractional is one of them). There was an old joke among economists about the economist who made a speech saying, "There are three types of economists: those who can count and those who can't."

A stated fractional basis is a predetermined earmarking of earnings. Commonly, if there are two partners with equal contributions and participation expectations, their fraction would be 1/2.

Then there are allocated earnings. One common rule of thumb used to be for basic participation after taxes: stockholders, reinvestment, employees, charities. The frequently found fractionation was 5 percent (because of tax guidelines) for donations (think of a corporate charity as many big corporations have them), 25 percent for dividends (stockholders), 50 percent for reinvestment, and the balance (I'm an economist that doesn't count) for bonuses. Actually, the last part is problematic because usually the top brass gets the biggest bonuses and they are often big stockholders so it is sort of double dipping, but some companies do have profit sharing.

So it is a share thing either way, but one is commonly based on ownership or liabilities (such as for venture capital who often have creative ownership and reward schemes contracted), on the one hand, and a schedule of purposes on the other hand.