When I've asked around for suggestions of who to talk to about this stuff, coming from the perspective we're coming from, and all roads lead to the Sustainable Economies Law Center (http://www.theselc.org/). If you haven't been to any of their events - these people are pretty awesome. They host regular Legal Cafes where anyone can ask a wide range of questions and find out for themselves what the deal is, including different options for the very things we're talking about. They also do regular Happy Hours where you can meet like-minded folks - there was one nearby at Make Westing last week.

It was in fact from Janelle Orsi, its Executive Director, that I got the idea that 501(c)(7) may be most appropriate. I got a chance to speak to her about Sudo Room at the last Legal Cafe event. She has her own law practice (http://janelleorsi.com/), and its my understanding that there's a long line of organizations who want to work with her. Interestingly, the SELC have seriously considered getting an office next to Sudo Room and still have not settled on any (semi-)/permanent location.

Recommendations for who else is best to talk to, especially in relation to crowd-funding, have also inevitably led to another founder of the SELC - Jenny Kassan. She's a partner at K2 Legal downtown here on Broadway (http://k2-legal.com/aboutus/ourteam/jenny/). She is also the CEO of Cutting Edge Capital (http://www.cuttingedgecapital.com/), who seem to consistently break new ground for finding possible ways to raise money in a cooperative structure. When I spoke to her recently, she intimated that they may have a crowd-funding platform operational in the next few months. She also mentioned that they would be looking for a whole bunch of new projects as candidates for launch on this platform. She was very pleased to hear that there are a lot of interesting and ambitious projects being hacked and hatched here at Sudo Room.

The other organization that always comes up when I've asked around is the East Bay Community Law Center (EBCLC) (http://www.ebclc.org/), which is also connected to Berkeley Law School Clinics. This is also an impressive and inspiring organization. They host the Neighborhood Justice Clinic (http://www.ebclc.org/njc.php) open to the public and helpful in getting questions answered.



On Thu, Jul 18, 2013 at 11:07 AM, mark burdett <mfburdett@gmail.com> wrote:
I'd say talk to a lawyer about this first, because the typical 501(c)3 is a corporation - the usual route is incorporating and then awaiting tax exempt status for the corporation.

(On the other hand, an LLC could make sense if sudoroom wants to keep around a non-501(c)3 entity that doesn't have all the restrictions of a tax exempt org... I know some enterprising (literally) artists who have created both LLCs and non-profit orgs so they can get grants and also operate as a business....)


This section requires that you attach a copy of your articles of incorporation and your bylaws to the application form. (Most nonprofits seeking 501(c)(3) status are corporations. If your entity is an LLC, unincorporated association, or nonprofit trust, you should seek the help of a lawyer with experience in nonprofit tax law to complete your Form 1023 application.)

--mark B.

On Thu, Jul 18, 2013 at 10:50 AM, Marina Kukso <marina.kukso@gmail.com> wrote:
thanks bill, very helpful!

what are the advantages to filing as an LLC?

also, i think that jenny recently had a call with james from the school factory - jenny, could you possibly share some of what you both discussed?

- marina


On Thu, Jul 18, 2013 at 10:43 AM, William Budington <bill@inputoutput.io> wrote:
Hey all,

I talked to Danny O'Brien (Noisebridge's financial functionary)
yesterday about the sudoroom legal status.  I know this has been an
ongoing discussion so I'm going to summarize the options we've already
looked into and present the new information Danny has brought to my
attention.

*Why do we need a legal status?*
Over the past few months we've found various challenges to our normal
operations since we don't have a legal status.  We aren't able to sign
up for services like Stripe without having a federal tax id.  In
addition, since we are formally under one person's name, he is liable if
anything happens at sudoroom.  Also, we aren't able to sign up for most
banks -- only the Community Bank of the Bay will actually give us a bank
account with our status as a DBA.  And as we've seen, Community Bank of
the Bay is not the most web-savvy organization, and so it's hard for us
to actually check our balances.

*What we've looked at*
Our eventual goal has been to get 501(c)3 status for sudoroom.  This is
a status that would allow us to accept tax-deductible donations and be
incorporated formally as a nonprofit.  A lot of Hacker Spaces go this
route, and it seems like a reasonable long-term goal.  One of the
problems we've been warned of is that it takes a long time to actually
be granted 501(c)3 status - upwards of 2 years, which can as I
understand be expedited to 10 months.

Because of this delay, we've looked into some other options -- namely
being umbrella'd under another organization's 501(c)3 status.  This
would involve 10% of our revenue going to said umbrella organization to
cover costs of the books.  I've been in contact with Danny at
Noisebridge and Jenny has been in contact with (Steve?) at the School
Factory and discussing if this is a possibility.  It is certainly one
way to go, but as for Noisebridge they've only umbrella'd Noisetor, and
they didn't need a separate account for that.

*What I've learned recently*
Danny mentioned that his partner is looking into nonprofit status for a
new feminist hacker space in SF, and has investigated these options as
well as others.  In order to have a certain degree of autonomy, it is
probably in our interests to actually not go the umbrella route and
pursue separate legal status altogether.  He also mentioned that there's
no reason why we couldn't incorporate as an LLC or other corporate
status before pursuing 501c3 status, and that even if it takes a number
of years to be granted non-profit status we can transition from an LLC
without much of a problem.  There's no real disadvantage to having LLC
status in the meantime, as I understand it.  The main advantage of
nonprofit status is tax deduction, but that is usually superseded on
most peoples taxes by the standard deduction.  The main place where it
does make a difference is when employers do matching donations for their
employees, then it can make a difference.

*The plan*
It makes sense to me to pursue the options that would resolve our
short-term problems without impeding the path to our long-term goals.
It seems to me reasonable as a short-term goal to register as an LLC
(Jenny tells me this can be done in an afternoon and with $50 with a
drive to Sacramento), and as a longer term goal actually pursuing
nonprofit, 501c3 status.

*Disclaimer*
There may be caveats to this plan and I'm not a lawyer.


Bill

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