The spolus need regular auditing, maybe once every four years by the spolu network. Are the spolu accounting rules being followed? Are management salaries within the 20x multiplier? Are the invoices for various “consulting services” actually for real services rendered — and not just a mechanism to move money out of the spolu. Has the spolu become unnecessarily complicated in its corporate structure?
In other words, the spolu auditing team will be checking to ensure the spolu is operating with the spolu spirit, working towards providing profit distribution for the stakeholders.
I recommend that each spolu be ranked for their adherence to its spolu spirit. That rank will be changed after each audit. After the first audit, a spolus can move from “New” to “2”. Another favorable audit moves it from “2” to “3.”
A rank of “1” means a spolu has some issues that need rectifying. If they are not rectified by the next audit, the spolu should be dropped from the spolu network. The spolu shares are converted to corporate shares, and the investors are now in full control of the business. This business no longer receives profit distributions from other spolus. It will likely suffer some loss of customers.
It is common practice for many businesses to set up multiple corporations, all with cross holdings in each other. In the same way, spolus may also spawn other spolus. For example, I alluded that the first spolu might want to set up the Spolu Exchange as a separate spolu. The first spolu may be the biggest or even the only investor in the Exchange. But the Exchange would run independently from the first spolu, with its own senior management team. And like all other spolu senior management teams, the investors will not have a majority vote.
Another example would be when a spolu moves some of its operations into another tax jurisdiction. For example, a construction spolu may find some business in another state or province, with different tax structures and business rules. It might be better for the main spolu to set up a second spolu for that location.
All spolus should have a primary business providing much of its income. If a spolu is more of a holding company (most revenue coming from spolu shares) rather than an operating company (with employees, customers, or suppliers), it might be appropriate for the spolu network to force this spolu to liquidate or convert to a corporation. It is important for the spolu network to keep a sense of openness about its operations. Too many “holding spolus” will seem like tax avoidance, obscure ownership, or corrupt transactions.
If an employee suspects her spolu employer is doing some “funny business,” she can send an anonymous, private communication to the first spolu. When the spolu is up for audit, the auditors have an accounting target to investigate. The employee will not be made known as the source for that target.
Dave’s Four Axioms
To digress, maybe this is a good place to introduce my four spolu axioms:
1. Keep your business structure simple!
2. Focus on your business!
3. Pay your taxes!
4. Distribute your profits!
Published on Medium
Spolu 16: Corp vs. Spolu Matrices
Please Put Me in an American Prison
