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CLS12 Session Name: ".org or not .org:

Moderator: @luispo

Note taker: @downey

Sunday, 15 July 2012 - 11:00 AM

Attendees: (Add your name here)

  • Michael Downey
  • Louis Suárez-Potts

Disclaimer: This session and its notes should not be construed as legal advice. Get lawyers and accountants when you need them.

Notes:

  • What are the options in forming a ".org"?
  • Two models:
    • Corporate launch of a community
    • Organic community growth
  • When forming a foundation, questions exist:
    • What kind of foundation?
    • What kind of non-profit?
    • How, if, and when to use a for-profit organization? Along with a non-profit?
    • What are your strategic aims? Evaluate all the types available.
  • The types of non-profit organization vary greatly worldwide. In the US:
    • Not-for-profit organization registered at state level only (but no US federal status)
    • US federal status:, 501(c)(3) is a general class of types of non-profit organizations. Many sub-types exist.
    • 501(c)(6) exists more for the benefit of a group (business league) than a specific project.
    • In terms of running a software project itself, there may not be much difference in practical terms.
    • 509(a)(3) is similar to a 501(c)(6) but exists to support other registered non-profit organiations' missions.
  • Resources:
  • "Umbrella" and other sponsorship organizations
    • Fiscal sponsors and conservancies like http://sfconservancy.org/, SPI, ASF, and others make it easier for some projects to get some of the benefits of non-profit status without having to form an independent organization. Many out there.
    • Opinions differ on whether or not this is a good idea. Consider cultural fit with your project, needs vs. services available, etc. The overseeing organization needs to watch things very closely as everything goes on their tax records.
    • Don't forget non-software organizations like charities, universities, etc.
    • Linux Fund has been an umbrella org in the past.
  • Benefits:
    • Tax deductions: Many people don't really get a benefit about open source project donations (they don't have enough deductions to make a difference).
    • Businesses often treat donations as advertising, etc., so they don't worry much either.
    • Often times, grants and non-profit organizations will look for 501(c)(3)'s so it may matter if funds are needed there.
    • Consider both immediate-term benefits and long-term benefits. May be differences over time.
  • Examples:
    • Recent reports of delays in IRS granting 501(c)(3) status for software projects
    • Some past organizations were able to get 501(c)(3) for specific software projects. These days, IRS seems to think software development isn't generally a charitable activity.
    • Open Stack Foundation went with a 501(c)(6) because it was a consortium of large companies working together on the project.
    • Drupal started out by first going to an umbrella org for donations.
    • Debian outsourced its "business" leadership to another organization (SPI). The brand and development happens in the volunteer community. Bank accounts in US and Germany. SPI owns & defentds the trademarks.
  • Tips:
    • Just have vendors buy things directly and bypass expenses directly.
    • Any time you get donations of any kind, keep a record of it.
    • Treat it like a business. Mission, strategy, record-keeping, etc.
    • In the US, respect the IRS. They are strict and can punish. Their word is "law".
    • Consider other countries than US if they meet your needs better. Recommendations for Iceland as friendly to open source organizations
    • Distribution over centralization. Don't build a big global organization and leave work to local groups when possible.
    • For really small projects, the overhead of an independent non-profit may be too high to make practical sense.
    • Consider whether or not to give legal responsibilties to a project volunteer rather than an employee or officer.
    • Be flexible. Foundations are serving a purpose, and are not THE purpose. If purpose is just managing funds & events, remember there are other possibilities.
    • Don't forget US state regulation in addition to the US federal organizations.
    • Governmental tax organizations don't care about commits & code. They only care about money.
  • Summary:
    • Questions to consider
    • Do you want/need a foundation?
    • Should you hook up with an existing sponsorship organization?
    • What locality should you use for a legal entity? Some countries have more freedom than others. Financial presence in multiple locations allow for flexibility and freedom.
    • How does your project's brand interact with the legal organization?

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