Every business has to pay for overhead, including licenses, utilities, insurance, and other general expenses. Revenue not used for compensation covers these shared expenses, and what is left over is net income. Some of that income is retained to sustain the business, and some is distributed to owners.
Cooperatives are member-centered businesses in which labor hires capital rather than the other way around, so the net income of a cooperative is allocated based on use of the services of the cooperative (called patronage) rather than how much capital each member has invested.
We track patronage credit based on what members are paid for their work and also for the revenues linked to that work. This means that billable work gets more credit than overhead work, but all work gets some credit. On each of our three holidays (the same days that we pay out bonuses), patronage credit is converted to non-voting shares, keeping each member's share holdings roughly aligned with that member's work.
Every month, we distribute 25% of the prior month's net income. We distribute an additional 25% of our annual net income at the end of each year. These distributions are made on a per-share basis, reflecting the work done by each member.
Undistributed income is used as operating capital or held as reserves that can be used to cover unexpected costs and sustain the cooperative for the long run.