The Omni/Structure

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The following proposed structures are based on some of Juul's ideas, research and talks with SELC lawyers.

First some terminology:

  • UmbrellaCorp: Organization that buys and owns building.
  • QuadFecta: sudo room, CCL, BAPS, timeless infinite light.
  • Conglomeration: UmbrellaCorp and the QuadFecta combined.
  • Investors: The people who put the money down for the 20% mortgage down-payment.

UmbrellaCorp is collectively owned by the QuadFecta. UmbrellaCorp receives the 20% down-payment from the investors, acquires a mortgage and buys the building. UmbrellaCorp collects rent from the QuadFecta groups every month and pays the mortgage payments, utilities, insurance, etc. UmbrellaCorp also pays back the 20% down-payment to the investors.

Both mortgage and repayment of investors come with some reasonable annual percentage rate, e.g. 4 to 5 percent.

UmbrellaCorp could be an LLC or a normal corporation or a coop. Coops have the "one person/group one vote" built into them, but you can build it into any corporation, it just requires more paperwork.

UmbrellaCorp will have to have a board of directors (it is unavoidable).

If we want to get property tax exemption, then UmbrellaCorp will have even stricter charitable requirements than a 501(c)(3) and as such UmbrellaCorp will probably not be able to have investors who want a return on investment. The investors will instead have to lend the money to UmbrellaCorp.

Either way, having the investors on the board of directors for UmbrellaCorp or as co-owners of UmbrellaCorp may constitute a conflict of interest and we'll have to look closely at the IRS rules. The IRS looks at whether or not the non-profits are mostly in control.

To get the mortgage, we may have to get one or more investors to co-sign the mortgage agreement, but that will depend on the bank. The ideal will be that only UmbrellaCorp signs the mortgage agreement.

Solving the problem of what happens if one groups can't pay the rent for one or more months is not too difficult, since there are existing residential associations that have solved this before. One of the SELC folks is sending us example paperwork for how to implement this.

Ensuring that UmbrellaCorp must sell the building if the mortgage is in danger of defaulting should not be too difficult either. It's a matter of writing it into contracts/bylaws with assurances of minimum buffers and what happens under different circumstances.

TODO finish writing this