# What is Social Capital

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What is it: Capital is the amount used to open a business. He has this name just for referring to his two utilities: (1) Capital, since it is the money actually used for the beginning of the business; (2) Social, since it is paid by the members of this new company.

## The Importance of Social Capital

The Social Capital has a first function that is to define and balance the responsibilities of each one of the partners. For example, a company has R \$ 100.000,00 of equity capital divided into 3 partners: partner A with R \$ 50.000,00, partner B with R \$ 40.000,00 and partner C with R \$ 10.000,00. Thus, the legal liability is proportionally divided 50% for partner A, 40% partner B and 10% partner C.

Another function of the social capital for specific cases of requests for loans and financing or participation of bids is the proof that the company has the resources to both pay back the money raised as well as assets for the provision of the service offered.

## How to Calculate Social Capital

Although there is no universal calculation for social capital, it must respect the reality of the company and its claims. Typically, in service companies, such as consulting firms, social capital is virtually symbolic. That is, you put as little as possible just to open the deal.

In companies that have many physical or permanent assets such as machinery and real estate, the initial capital usually initial investment of the business, precisely because of what we said above about this amount being used as the credit assessment basis for financing.

## Social Capital Update

As the company grows, it is possible to update the social capital of the business. For this, the social contract, signed by all the partners, with a recognized signature and business council of your state. In addition, it is always necessary to pay capital for the change to be validated, that is, the new capital must be verified in the bank account of the company.

As previously stated, usually the motivation for this type of change is to take new loans or participate in specific bids for larger companies.

## Share Capital vs. Shareholders' Equity

Although both numbers are similar, they represent the capital of the partners. However, social capital is the initial money used to start operations, since net equity is one of the areas of balance sheet of the business that constantly changes and represents the amount of capital available to members to make a profit if they wish.