[sudo-discuss] Legal Status

[William Budington]

The advantages of LLC as I understand it is:

1) It would give us a Tax ID #
  a) So we can sign up for stripe
  b) so we can get off community bank of the bay
2) It's limited liability, so if someone gets injured at sudoroom and
sues it won't rest on one person's hands

Bill

On 07/18/2013 10:50 AM, Marina Kukso 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 at 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
>>
>> _______________________________________________
>> sudo-discuss mailing list
>> sudo-discuss at lists.sudoroom.org
>> http://lists.sudoroom.org/listinfo/sudo-discuss
>>
>