<html>
<head>
<meta content="text/html; charset=ISO-8859-1"
http-equiv="Content-Type">
</head>
<body bgcolor="#FFFFFF" text="#000000">
<br>
Re. J.D.Z and Patrick-<br>
<br>
Yes and yes;-) <br>
<br>
The language re. non-profits and recusal, might be something like
this: "recuse themselves from all matters in which they have a
personal financial interest." <br>
<br>
This isn't a problem for a land trust or a church or scientific or
educational organization; it only becomes an issue when a
substantial number of people in the organization are performing work
for the organization. So it's contrary to the needs of
worker-ownership, but if those needs were critical, they would be
accommodated in a workers' coop using the consumer coop structure,
if that ever became necessary. <br>
<br>
In any case it seems to me that one of the things hackerspaces do is
encourage members to start various small businesses as
wholly-independent entities (that may none the less use facilities
in the hackerspace for their work). So any "workers" among the
"members" could/would be independent entities, thereby resolving the
issue of how that works in a nonprofit organization.<br>
<br>
"Micro-enterprise incubator" is also a valid purpose for a
nonprofit, one among many in the case of hackerspaces: science &
technology education, support for original research (such as
biohackers working on treatments for resistant infections, AI
research, etc.), micro-enterprise development (education + support
& assistance, then the micro-enterprises spin off as separate
legal entities), etc.<br>
<br>
Re. federal nonprofit status: This entails a filing with the IRS,
and the IRS takes into account the previous history of the entity:
has it acted in accord with a purpose that is consistent with its
desired tax-exempt nonprofit status? This affects the type of
entity that would be used for the initial existence of the
organization: for example the IRS is more likely to approve a
conversion from an entity type X to a nonprofit, than from an entity
type Y to a nonprofit. I don't know what the Xs and Ys are here,
this is also something that definitely requires an attorney. <br>
<br>
Then when you make the filing with IRS, IRS will typically assign
someone to work with you on it, to help get it approved. This can
still take well over a year to become finalized. But during that
time, you can still solicit donations and suchlike, provided that
you inform donors that their donations may not be tax-deductible,
and that an IRS decision on tax-exempt status is still pending. <br>
<br>
One thing that counts with IRS is if the organization begins by
acting in the manner of a nonprofit, while its status is still
pending. Do the mission from day one, and fulfill the requirements
of a tax-exempt nonprofit from day one. <br>
<br>
Another thing that counts is the mix of small and large donations,
and the quantity of donors. If an organization is mainly funded by
one large donor (or a small number of large donors), it may be
treated as a foundation and not gain the same kinds of benefits as a
tax-exempt organization. So there is always a need to keep a strong
grassroots fundraising/donation program going. All of these details
are more stuff for an attorney to figure out. <br>
<br>
One thing that's an obvious no-no is involvement in partisan
politics, e.g. supporting or opposing candidates for office or
ballot measures. Educating the public and elected officials is OK
as part of the mission, but has to be non-partisan with respect to
candidates and ballot measures.<br>
<br>
Generally the IRS is friendly toward grassroots groups seeking
nonprofit status, and the people at IRS who work with these groups
are seeking to get them successfully approved. It helps if the
person who is the group's contact-person who speaks with the IRS is
an attorney or otherwise well-informed about the process. <br>
<br>
-G.<br>
<br>
<br>
=====<br>
<br>
<br>
<br>
<br>
<div class="moz-cite-prefix">On 13-10-05-Sat 8:06 PM, J.D.
Zamfirescu wrote:<br>
</div>
<blockquote
cite="mid:CAO5ydeFVxuw+Ku9opWnetsk0bxvLLxs5Nqv1udV2oDz9WiSAPg@mail.gmail.com"
type="cite">
<div dir="ltr">I had just started to write something similar to
G's email, having gone through the incorporation process a few
times for C-corps and non-profits in the past couple years --
I'm certainly not a lawyer and this is definitely not legal
advice.
<div>
<br>
<div style="">G's notes match mine on all points but one: My
understanding is that in a 501c3 non-profit, decision-makers
*are* allowed to receive pay from the organization, however,
they should recuse themselves from discussions of their own
pay. (That pay also has to be "reasonable".)</div>
<div style=""><br>
</div>
<div style="">Just to add a few more thoughts to the mix:</div>
<div style=""><br>
</div>
<div style="">On B-Corps: A "B Corp" isn't actually a separate
legal structure, so we would be a B Corp *in addition* to a
C-Corp or LLC or non-profit or other structure we chose, not
*instead of*.</div>
<div style=""><br>
</div>
<div style="">On non-profit status: Being a non-profit bring
advantages beyond just being exempt from federal income
tax: </div>
<div style="">+ Many foundations and charities only give to
non-profits, if we were one, we could apply for grants and
stuff.</div>
<div style="">+ Individuals can deduct donations to
non-profits from their own income taxes</div>
<div style="">+ California waives the $800 annual minimum
franchise tax for non-profits</div>
<div style="">+ Many companies have donation matching
programs, where employees who donate $XXXX to a non-profit
will see that contribution matched by their employer,
yielding 2*$XXXX for the non-profit.</div>
<div style="">+ No one owns the organization in a non-profit.
There are no shares, and no issues with valuing those shares
if the organization owns property and that property
appreciates in value. There can be members, and the rights
of the members would be chosen by us, and are described in
the bylaws of the organization. (<a moz-do-not-send="true"
href="https://www.noisebridge.net/images/4/47/Noisebridge-bylaws-as-filed.pdf">Noisebridge's
bylaws</a>, for reference.) One-member/one-vote is quite
typical.</div>
<div style=""><br>
</div>
<div style=""><br>
</div>
<div style="">My best guess would be that sudoroom should
probably be a non-profit. In this structure, there would be
a Board of Directors, whose actions could be constrained by
the by-laws to act as the members direct.</div>
<div style=""><br>
</div>
<div style="">I'm happy to answer any questions folks might
have. The wednesday meetings have been tough for me to
attend over the last few months, but I hope to make it to
more in the future!</div>
<div style="">
<br>
</div>
<div style="">Best,</div>
<div style="">J.D.</div>
<div style=""><br>
</div>
</div>
</div>
<div class="gmail_extra"><br>
<br>
<div class="gmail_quote">On Sat, Oct 5, 2013 at 7:40 PM, GtwoG
PublicOhOne <span dir="ltr"><<a moz-do-not-send="true"
href="mailto:g2g-public01@att.net" target="_blank">g2g-public01@att.net</a>></span>
wrote:<br>
<blockquote class="gmail_quote" style="margin:0 0 0
.8ex;border-left:1px #ccc solid;padding-left:1ex"><br>
A few things about incorporation (I am not a lawyer, this is
not legal<br>
advice):<br>
<br>
<br>
S corps: Last I checked these were limited to 35 owners, all
of whom had<br>
to be US citizens.<br>
<br>
C corps: The entity most people think of when they say
"corporation."<br>
No limit to the number of owners, and owners may also be
persons other<br>
than US citizens.<br>
<br>
B corps: A "B-corp" is a corporation that states a set of
intrinsic<br>
values & principles as part of its structure,
supplementing or<br>
supplanting the default assumption that the primary purpose
to be served<br>
is to increase shareholder value.<br>
<br>
In each of the above structures, ownership shares are equal
to dollars<br>
invested, and the vote inheres in the shares rather than in
the persons<br>
(thus you can have unequal voting power based on share
ownership).<br>
<br>
There are possible mechanisms for a one-person/ one-vote
system, based<br>
on having two or more classes of shares, such as "preferred
shares" and<br>
"common shares." This enables you to have one class of
shares that has<br>
voting power, and one class of shares that does not have
voting power<br>
but has preference in allocation of dividends when profits
are earned.<br>
Thus for a one-person/ one-vote system, you'd sell only one
share of<br>
voting stock to each person, and as many shares of
non-voting stock to<br>
each person as matches their financial investment. Setting
up this type<br>
of system requires an attorney to ensure that it meets legal<br>
requirements to protect the owners and investors.<br>
<br>
<br>
In addition there are three types of co-operative
structures, which are<br>
also incorporated entities that confer the same "limited
liability"<br>
protections as other types of corporations:<br>
<br>
"Consumer coops" also include most worker-owned coops, where
individual<br>
persons are the members and owners.<br>
<br>
"Producer coops" serve individuals and companies that
produce goods &<br>
services, such as a dairy marketing coop that serves dairy
farmers. In<br>
this case, the members have some common interest in shared
productive<br>
resources such as infrastructure.<br>
<br>
"Central organizations" are coops that have other coops as
members, such<br>
as a network of coops in a geographic area or common field
of business,<br>
or sharing infrastructure in the manner of a producer coop
whose members<br>
are coops.<br>
<br>
In each of these cooperative structures, you have membership
shares,<br>
allocated one share to each member for a fixed price, such
that each<br>
member has one share and one vote. Thus the one-person/
one-vote<br>
principle is built into the structure without need of
multiple classes<br>
of shares.<br>
<br>
<br>
LLCs:<br>
<br>
LLCs were originally designed as hybrid structures to
accommodate groups<br>
of professionals such as doctors and lawyers engaged in
group practice,<br>
but have since become used for other types of business, real
estate<br>
ownership, etc. LLCs were deliberately designed to be
flexible in their<br>
legal structure and methods of governance. In an LLC, the
vote is also<br>
separate from the investment share, such that you can create
a<br>
one-person/ one-vote system, with less complication than in
a C-corp or<br>
S-corp.<br>
<br>
<br>
One thing to be careful of, for any type of legal entity,
and this will<br>
require legal advice to get it right, is to make sure that
your share<br>
price or membership price does not increase in a manner that
you can't<br>
control, such as to make it impossible for new persons to
buy in.<br>
<br>
This can occur when the primary asset is real estate, as the
"assessed<br>
value" of the property increases over time. This was
historically a<br>
problem in some forestry coops in the Pacific Northwest, and
some other<br>
cases that are known in the literature. I'm inclined to
believe that<br>
setting up a property as a "land trust" or similar entity,
may be a<br>
mechanism to hold the asset value of property more stable
against<br>
speculative increases in nearby property prices, and so
reduce these<br>
risks, but this needs to be checked with a lawyer.<br>
<br>
<br>
Corporations and cooperatives, and possibly LLCs, have
Boards of<br>
Directors elected by the shareholders or members, and have
three<br>
positions that are required by law (any person may hold one
or more of<br>
these positions):<br>
<br>
= Board of Directors: Elected directly by vote of the
shareholders or<br>
members (typically every two years). Makes policy decisions
and selects<br>
the positions below. For practical reasons the number of
Directors<br>
should be small enough to be able to meet without scheduling<br>
difficulties, for example 5 - 7 people.<br>
<br>
= CEO: Chief executive officer. Signs most legal documents
for the<br>
entity, can make other routine decisions per authority
delegated by the<br>
Board.<br>
<br>
= CFO or Treasurer: Chief financial officer. Responsible
for the<br>
entity's financial documents and statements.<br>
<br>
= Secretary: Responsible for receiving and for filing of
routine<br>
documents with various state agencies, and for maintaining<br>
legally-required records of the organization.<br>
<br>
= Attorney of Record, or Agent for Service of Process: This
is not a<br>
"CXO" type position, but is typically required to ensure
that any<br>
documents relating to legal processes, can go to a specific
person at a<br>
specific address.<br>
<br>
<br>
All of the above structures, when configured for one-person/
one-vote,<br>
are representative democracies.<br>
<br>
To configure as a direct democracy of the members, Bylaws
would be<br>
enacted by the initial incorporators or first Board of
Directors, such<br>
that on specified issues, the Board is bound to act only in
accord with<br>
the direct votes of the members.<br>
<br>
Thus you could empower the Board to make certain types of
decisions on<br>
its own, and other types of decisions only in accord with
direct<br>
democratic votes of the members.<br>
<br>
When deciding on a structure, it's useful to consider the
distinction<br>
between the types of decisions that can be handled by
"delegated<br>
authority" such as by the Board, CEO, CFO, and Secretary,
and the types<br>
of decisions that you'd prefer to handle by direct vote of
the members.<br>
<br>
It's also useful to consider the threshold of direct vote
required to<br>
pass a proposal. The default options in most types of
structures are<br>
50%+1 for most types of decisions, and 2/3 majority for
changes of the<br>
Bylaws and other structural decisions. On the other hand,
pure<br>
consensus sets a 100% threshold, and varying degrees of
near-consensus<br>
can set other thresholds such as 80% for specified purposes.<br>
<br>
<br>
One thing to keep in mind for Federal 501 tax-exempt
organizations<br>
(religious, scientific, educational, or charitable entities)
is that the<br>
law prohibits persons in decision-making capacities from
receiving<br>
monetary benefits from the entity. In discussions of<br>
democratically-managed entities, this is usually interpreted
to mean<br>
that workers/employees/contractors of an entity, are not
allowed to have<br>
voting power, since they receive wages/salaries/etc. from
the entity.<br>
So to the extent that the entity expects to pay any of its
members for<br>
services they provide, or pay out any kind of dividendsre or<br>
retained-earnings distributions, this issue will need to be
considered,<br>
and it also requires input from an attorney to get it right.<br>
<br>
<br>
-G.<br>
<br>
<br>
=====<br>
<div class="HOEnZb">
<div class="h5"><br>
<br>
<br>
On 13-10-05-Sat 6:13 PM, Yardena Cohen wrote:<br>
> This was meant to get sent out after Wednesday's
meeting. Sorry it took so long.<br>
><br>
> In short, we are coming close to filing Sudoroom as
a California<br>
> corporation. We want to do this as consensually and
horizontally as<br>
> possible, but also soon. As in, the next few weeks.
Let this e-mail<br>
> thread be your official opportunity to lobby
objections, concerns and<br>
> desires. Here is some background for clarity, and
some homework.<br>
><br>
> PROFIT vs NON-PROFIT: this is the distinction that
gets talked about<br>
> most often, but actually seems to be the most
remote/non-issue<br>
> question right now. 501 (c3, c5, c*) is a chapter
of the Federal IRC,<br>
> meaning it ONLY relates to Federal income taxes.
You ask the IRS to<br>
> recognize you, and they take a few years to start
letting you keep<br>
> your money. But we're NOT AT THIS STAGE YET because
legally we DON'T<br>
> even EXIST YET.<br>
><br>
> INCORPORATION: this is how you exist. It is not a
federal process -<br>
> you ask your U.S. State to recognize you. Each
state does it a little<br>
> differently. Generally the old traditional type of
corporation is a<br>
> C-Corp, and newer types are LLC and B-Corp. This is
something we all<br>
> need to learn more about! We need to decide the
pros and cons of each<br>
> type. That is our homework assignment #1.<br>
><br>
> WRITING OUR ARTICLES: when we file papers we will
have to submit<br>
> Articles/Bylaws. This will be a legal document
describing who we are<br>
> and what the terms and rules of our incorporation
are. It is<br>
> OPEN-ENDED meaning very hackable but also
intimidating. It's been<br>
> proposed that we use Noisebridge's articles as a
starting point and<br>
> edit them to our liking to make them most
Sudo-appropriate. It's on<br>
> our wiki now: <a moz-do-not-send="true"
href="https://sudoroom.org/wiki/Bylaws_in_progress"
target="_blank">https://sudoroom.org/wiki/Bylaws_in_progress</a>
Reading,<br>
> understanding, and hacking at this document is
homework assignment #2!<br>
><br>
> MEMBERSHIP: observant readers will note
incorporation implies there<br>
> are "owners." We have to figure out once and for
all how to decide<br>
> membership. This is it, folks. Time for us all to
step up and ask "who<br>
> the fuck are we?"<br>
><br>
> So, in summary, the next steps are:<br>
><br>
> 1) Decide on LLC vs C vs B Corp<br>
> 2) Write articles/bylaws to file with<br>
> 3) who the fuck are we?<br>
> _______________________________________________<br>
> sudo-discuss mailing list<br>
> <a moz-do-not-send="true"
href="mailto:sudo-discuss@lists.sudoroom.org">sudo-discuss@lists.sudoroom.org</a><br>
> <a moz-do-not-send="true"
href="http://lists.sudoroom.org/listinfo/sudo-discuss"
target="_blank">http://lists.sudoroom.org/listinfo/sudo-discuss</a><br>
><br>
<br>
_______________________________________________<br>
sudo-discuss mailing list<br>
<a moz-do-not-send="true"
href="mailto:sudo-discuss@lists.sudoroom.org">sudo-discuss@lists.sudoroom.org</a><br>
<a moz-do-not-send="true"
href="http://lists.sudoroom.org/listinfo/sudo-discuss"
target="_blank">http://lists.sudoroom.org/listinfo/sudo-discuss</a><br>
</div>
</div>
</blockquote>
</div>
<br>
</div>
</blockquote>
<br>
</body>
</html>