Dividends
How capital gains from equity sales are distributed to your personal token shareholders
What are Dividends?
If you have shareholders in your personal token, whenever you sell equity in a personal token or company at a profit, the capital gains (the profit portion, not the entire proceeds) are distributed to your shareholders proportional to their ownership in your personal token.
How Dividend Distribution Works
Capital Gains Only
Dividends are based on capital gains (profit), not the entire sale proceeds.
Example:
- You purchased personal token shares for $10,000
- You later sold them for $15,000
- Capital gain: 10,000 = $5,000
- Dividend pool: $5,000 (only the profit portion)
Proportional Distribution
Capital gains are distributed to shareholders based on their exact ownership percentage in your personal token.
Example scenario:
- Your ownership: 80%
- Investor A: 15%
- Investor B: 5%
- Capital gain: $10,000
Distribution:
- You receive: 8,000
- Investor A receives: 1,500
- Investor B receives: 500
Dividend distribution happens automatically through the Network’s smart contracts, ensuring accurate and immediate payments.
Types of Equity Sales
Personal Token Sales (Immediate)
When you sell equity in another personal token:
- Capital gains are immediately calculated and distributed
- Payments happen instantly through the Network
- No manual reporting required
- All information is automatically tracked
Company Equity Sales (Manual Reporting)
When you sell equity in a company:
- You must manually report the transaction
- Annual reporting deadline (by tax deadline)
- You deposit the dividend amount into the Network
- Distribution then happens automatically
Failure to report company equity sales on time may affect your reputation score in the Network, which is visible to current and potential investors.
Dividend Flow Mechanics
Single-Level Distribution
Capital gains distributions flow directly to your token holders but do not cascade further up the network.
Example:
- Alice holds shares of Bob’s personal token
- Bob holds shares of Dan’s personal token
- When Dan sells equity and generates capital gains:
- Gains are distributed to Dan’s token holders (including Bob)
- Gains stop there - they don’t flow to Bob’s token holders (like Alice)
- Alice can only benefit if Bob’s token value increases and she sells at a higher price
Immediate vs. Deferred Benefits
- Direct shareholders: Receive immediate dividend payments
- Indirect shareholders: Benefit only through increased token value
Reporting Requirements
For Personal Token Sales
- No reporting needed - automatically handled by the Network
- Instant calculation and distribution
- Complete transparency for all parties
For Company Equity Sales
- Annual reporting required by tax deadline
- Provide basic transaction information:
- What you sold
- When you sold it
- Original purchase price
- Sale price
- Capital gains calculation
Prepare Documentation
Gather transaction records, tax forms, and purchase/sale details
Submit Report
Use the Network’s simple interface to report transactions
Calculate Gains
Network automatically calculates capital gains
Deposit Funds
Transfer dividend amount to your personal token wallet
Automatic Distribution
Network distributes to shareholders proportionally
Future Automation
The Network is building integrations with popular platforms to automate company equity reporting:
- Equity management platforms - Automatic import of transactions
- Investment services - Direct integration with brokerages
- Tax preparation software - Seamless data transfer
Most users can complete annual reporting in minutes through the Network’s streamlined interface.
Reputation System
The Network maintains a reputation score based on:
- Reporting accuracy - Correct information and calculations
- Timeliness - Meeting annual reporting deadlines
- Consistency - Reliable track record over time
- Transparency - Open communication with shareholders
Impact of Reputation
- Visible to investors - Shown on your personal token profile
- Affects fundraising - Higher reputation attracts better investors
- Investment opportunities - Other token owners consider your reputation
- Network standing - Influences your overall position in the ecosystem
Verification and Escrow
For larger transactions, the Network may implement additional verification:
- Document review - Verification of transaction details
- Temporary escrow - Small percentage held until verification
- Release timeline - Funds released upon confirmation
- Dispute resolution - Process for handling discrepancies
Tax Considerations
Dividend distributions may have tax implications. Consult with tax professionals to understand your obligations.
For Token Owners
- Capital gains on your equity sales
- Dividend income from your token holdings
- Reporting requirements for distributions made
For Shareholders
- Dividend income received from token holdings
- Potential capital gains on token sales
- Record-keeping for tax purposes
Example Dividend Scenario
Let’s walk through a complete dividend scenario:
Initial Investment
You bought 100,000 shares of Token XYZ for $50,000
Sale Transaction
Three years later, you sell all shares for 120,000 - 70,000
Shareholder Structure
Your personal token ownership: - You: 70% - Investor A: 20% - Investor B: 10%
Dividend Distribution
49,000 (70%) - Investor A receives: 7,000 (10%)
Automatic Processing
Funds distributed instantly to all shareholders’ wallets
Maximizing Dividend Value
Strategic Considerations
- Timing of sales - Consider market conditions and tax implications
- Portfolio diversification - Balance between dividends and growth
- Shareholder communication - Keep investors informed about upcoming distributions
- Tax optimization - Structure sales to minimize tax burden