[sudo-discuss] Legal Status

[Anthony Di Franco]

Does anyone know how being an LLC interacts with being umbrella-ed under
Noisebridge or another nonprofit if it is compatible at all? (So that
hypothetical surpluses would not be profits?)


On Thu, Jul 18, 2013 at 10:57 AM, William Budington <bill at inputoutput.io>wrote:

> 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
> >>
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> >>
> >
>
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