Joining forces with OpenDesign.io


(Brennan Novak) #1

For the last few months myself @simonv3 and @jan were an email thread with a very talented designer from the United States named Mike Finch or @mkfnch who a couple years ago started an endeavour called OpenDesign which has many goals similar to OSD.

This last weekend Mike wrote to us propsing merging his endeavour with ours. Specifically, he meant giving Open Source Design the following:

  • The opendesign.io domain
  • All the research (about designer / dev collaborations) Mike has done
  • All the design work Mike has done on opendesign.io
  • The @opendesignIO Twitter account; or post a redirect to @opensrcdesign
  • Mike offers help with any custom design needed for the transition / ongoing things
  • As an employee at SpiderOak, at some point Mike would like to interview OSD core for a blog post and potentially help as a partner
  • Help evangelize / push traffic to Open Source Design through interviews / conferences / social media

Mike also wanted the following to be part of the arrangement:

  • Registering Open Source Design as a legitimate 503c3 non-profit in United States

Mike offered to pay all the registration fees and list the existing core team as founders or officers of the non-profit. We are still discussing if a US non-profit vs. a German entity is better for OSD (in it’s current form) or perhaps both. Regardless, I think any of these options are a good step for OSD.

Additionally, i’m very excited about Mike joining us as he created designs representing the job board of my dreams and now all it needs to be is coded up :smile: I will post updates here as that progresses.

Please weigh in with any thoughts, ideas, concerns, hopes, etc :wink:


(Jan-Christoph Borchardt) #2

Does anyone know if an organization can be registered as both 501©3 and German e.V.?

Here’s my take regarding the 501©3: Researching more and diving into the whole non-profit
registering again I would really be way more comfortable if we register
Open Source Design as a German e.V. (registered association) instead of
a US 501©3:

This has several reasons:

  • An e.V. has all the benefits that a 501©3 also offers, like being
    an autonomous legal entity and being seen as official.
  • Most of our active members are based in Europe, especially in
    Germany. Associations can be international by the members simply being
    international.
  • I would be quite uncomfortable to register something based in the US,
    based on general and especially recent politics.

There are several big other associations which are in a similar sphere
of work as we are who are also registered associations (e.V.). Here’s
a short list with some of them including their constitution / Satzung.

We could then even use the Open Source Design Summit
in Berlin as the founding meeting: http://opensourcedesign.net/summit

Becoming an official non-profit would make a good statement that we really are serious about this. More than a loose group of people, but a collective with a shared goal that can be depended upon. That’s also important for partnering with other organization, getting donations, etc.


(Ryan Gorley) #3

Register where you will, but I think basing the decision on current politics would be shortsighted.


(Felix A. Epp) #4

I’m all for becoming somewhat more official. And besides the reason of being perceived as more serious: IMO the real reason comes from actual rules for handling of funds and the necessity of having defined roles. This should help engagement a lot.

I also feel the decision 501©(3) vs. e.V. should not be based on sentiments, but practical.

Here’s the Wikipedia article on 501©(3) for completeness: https://en.m.wikipedia.org/wiki/501(c)(3)_organization

Interesting is the paragraph on Foreign subsidiaries, when thinking about having both. Because it seems to me, there has to be one head organisation.


(Jan-Christoph Borchardt) #5

@bnvk and I talked a bit about this and the conclusion was that registering it as both an e.V. and a 501©3 is probably best. :slight_smile:


(Sam Muirhead) #6

One note on the 501©3 issue - talking to founders of the Open Source Hardware Association, they mentioned that they felt somewhat penned in by the non-profit requirement that they should not be seen to be promoting for-profit businesses. A core aspect of of what they do is supporting and promoting open source hardware projects… which are often for-profit businesses. This meant they had to be quite careful in how they framed events, and also had to, for example, hunt out people who weren’t running an open source business to write about how to run an open source business.
Sorry that this is so anecdotal, unfortunately I don’t have more specific information about these clauses or requirements, and there doesn’t appear to be documentation of the problems that OSHWA had - I can reach out for more info if it’s useful.

+1 for incorporating as (at least) an e.V. and joining forces with opendesign.io though!


(Mike Finch) #7

Hey friends, sorry for the delay in participating in this thread. I’ve been out sick the past few days.
@bnvk did a great job of introducing me, but if anyone has any questions they’d like to ask me about this, feel free to ask me anything! :slight_smile:


(Ryan Gorley) #8

@mkfnch I’m embarrased that I was not familiar with the work you’ve already done with opendesign.io, but it looks awesome. It will be great to have you involved!


(Mike Finch) #9

Hey sir, no embarrassment necessary! :slight_smile:
Thanks for the welcome!


(Jan-Christoph Borchardt) #10

That was my impression too. Hence I’d prefer the e.V. to be the head cause the main part of our community as of now is mainly in Europe (and we do the Summit in Berlin, might be good if we want funding for travel etc.)


(Moritz) #11

Hi everyone! I help quite a bit of people with the establishment of legal entities, and was asked to provide some input to this discussion. I am not a lawyer, and I’m definitely no expert on US law, but I have helped to start a bunch of 501c3s and plenty of (charitable) organizations in Europe.

In short, I would like to resonate that the German e.V. is probably what you’re after, and I’m happy to help with the details. It does depend however on what your goals are, what kind of funding you plan to apply for, and what activities you plan to do. Things like Transferwise “Borderless” make it easy to deal with foreign currency – Transferwise can provide you with a US bank account even as a German e.V.

The charity status is often conflated with the type of legal entity. It is however independent from the type of entity - an e.V. does not necessarily need to become a charity (“beneficial to the public”), similar to how in the US you can be a non-profit that does not apply for national 501c3 status.

The distinction between the different types of legal entities is not clear cut, because you have a lot of options in how you define the actual entity in its bylaws. Looking at the e.V. (registered association), I’m not aware of a similar type of legal entity existing in the US. Typically, a registered association has a process for individuals and, possibly, legal entities to become member. Each member has (equal) voting rights in the general assembly. The general assembly is the highest organ inside the organization, and votes on all important issues including the organization’s representation by an executive board of directors. This is in contrast to how most “501c3” are set up, where a self-electing board governs the legal entity, and much more bottom-up.

A few things are stricter in Germany: Receipts need to be kept around in “original form”, which means that for reimbursements it is not enough to get scans or photos of receipts from people, they need to send in the physical receipts (if there are any).

A typical problem that people run in is that you need to hand in paperwork including a narrative report after the first year, but then only every 3 years. A lot of associations manage to survive the first year of keeping the paperwork in order, then slowly become less well-organized during the following three years, and when it’s time to again submit paperwork have to basically (re-)do three years of accounting.

Another downside is that the essential paperwork has to be done in German: The accounting itself (which is pretty straightforward once you understand how to do it properly), but also the annual reports and the minutes of all general assemblies. The “source material” for the minutes can be kept in English and then summarized in German, which is what eVs with international membership usually do, but someone has to translate them and ideally at least two of the board members speak German and can deal with necessary interactions.

You can do general assemblies online, but that needs to be declared upfront in the bylaws, and there’s some amount of required process. All of this is meant to protect the organization in case of conflict (with its membership).

In terms of timeline: Someone would draft bylaws (I am happy to help with that since there are a few nice things you can take care of in them), and then send them to the tax authorities for review. It will take a few weeks for them to evaluate whether the bylaws meet the requirements for charities. You might have to submit a second and third time, so all-in-all this might take some time. There’s a nice feature you can implement in the bylaws which allows the elected board to modify the bylaws without another general assembly if tax authorities require changes, so in theory you can establish the organization already before you have the final feedback, but I strongly suggest you first get the approval and then have the first general meeting to create the organization. The elected board has to go to a notary to have it confirm their identities. The notary will then submit the information to the registry. The (public) registry will hold the names and addresses and birth dates of all board members, and a copy of the bylaws. Board members do not strictly have to be German residents, but it makes interactions easier if at least two of them are.

The typical way to establish an eV is to get at least seven people together in person to hold the first assembly. You need signatures of at least 7 people before the board can go to the notary to register it. In theory, you could even do the first members assembly online, physically mailing around the signatures of all founding members until at least seven people have signed on, but this requires a certain level of rules stated in the bylaws, and should be done with the permission of the tax authorities.

A relevant question is the registered address of the association: Someone with a pretty stable address needs to reliably be able to receive and open postal mail at that address (yes, there will be some, especially at the beginning), and the location of that address defines which tax office is responsible. It is not easy to move associations around, and ideally it stays with the same tax office. It is possible to for example use a lawyer’s office as address (or eg a hackerspace).

Overall, the costs are less than 100€ for the notary and the registration.

There’s a lot more details that we should discuss, but maybe in a smaller round in person?


(Jan-Christoph Borchardt) #12

@moritz awesome, thank you so much for the valuable info! :slight_smile: I also co-founded an e.V. before but that was long ago and I forgot most.

We should meet up some time during the next weeks – where are you based? Some people like @bnvk @jdittrich @Incabell @htietze @cameralibre @danila.pellicani @guiguru and me are based in Berlin so we could do a small meeting regarding that for whoever is interested.


(Brennan Novak) #13

Wow @moritz thank you so much for that as well as offering to help :slight_smile: all super helpful information. It does indeed sound like an e.V. might be our best bet, except this is only bit that surprised me and could prove challenging:

[quote=“moritz, post:11, topic:203”] the essential paperwork has to be done in German: The accounting itself … but also the annual reports and the minutes of all general assemblies.
[/quote]

At present we have regular German speaking contributors and core members, but things do change over time- peoples schedules get cramped, priorities shift, etc… then what would happen? I’m sure with enough resources this could be overcome, but is something to consider.


(Moritz) #14

Well, you would have the same problem with a 501c3: Someone has to do the paperwork. It is not a crazy amount of effort, but it needs to happen reliably and continuously. If you have the funding you can of course outsource it to some accountant/bookkeeper.

The whole thing does not totally crash if it doesn’t (and nobody notices), tax authorities at least in Germany are used to associations who don’t exactly manage to have their shit together, and you can recover for it.

Another important aspect, and there I don’t know what exactly you plan to do with the entity, is that it all sounds nice to be a charity, but you really have to do things that “benefit the public” (vs. “services that only benefit a specific target group”). A lot can be engineered with a bit of creativity, and argued for, but it’s not a simple “oh we’re a non-profit, we don’t extract profit and we can simply do whatever”. Just in case anyone thought that. :wink: (That includes potential problems with “grants” (legally, quite often actually contracts) that are for specific work packages where the outcomes not necessarily benefit the public.) Some crafting needs to be done so you can afterwards (potentially) argue that the license of the project already makes it something beneficial for the public, but it might not be as straightforward as you think. The same goes for a 501c3, and in the US people are used to paying lawyers for the creation and everything. In Germany, you’re not expected to hire a lawyer to create or run an eV.

I will be in Berlin from July 17-20, and again in the end of August.


(Ryan Gorley) #15

It sounds like the amount of work to maintain just an e.V. is significant. It seems at least plausible we could obtain funding from one or a few of the larger open-source friendly businesses in the United States. If the organization decided to skip the 501c3 for legitimate practical reasons, I’m guessing any donations from U.S. corporations would not be tax-exempt as charitable giving, right?


(Moritz) #16

Oh just to set this right, the amount of work to maintain a 501c3 is at least the same amount of work required to maintain an eV, not less. The warning about “you need someone reliable to take care of paperwork and physical mail” is exactly the same for a 501c3, or any organization for that matter.

From what I hear (and in my experience), the process to register a 501c3 and get the confirmation takes months and more investment than <100€.

But, yes, if you plan to fundraise from US organizations, only donations to 501c3s are tax deductible. For European charitable funders that work with grants, it is much easier to give money to a German eV, for US charitable funders easier to give money to a 501c3 (but not impossible to give to European non-profits).


(Jan-Christoph Borchardt) #17

Cool stuff @moritz! :slight_smile: I’ll be away on the July dates you are here, but can do end of August. If you can, it would be great to have you at our next monthly Open Source Design call: https://cloud.nextcloud.com/apps/calendar/public/MIFAFLFJADIVX63I – it’ll be Tuesday July 4, 19:00 Berlin time.


(Mike Finch) #18

This is one of the primary reasons I was hoping to register as a 501©(3).
Needless to say, It’s much easier to arrange partnerships/sponsorships/donations with companies here in the states when their involvement is tax deductible.

Many corporations incorporate as separate entities in different countries for tax benefits… @moritz, is that the kind of thing we can do here so we can benefit from both continents?


(Rory Aronson) #19

Just wanted to chime in with some of my own experience in incorporating OpenFarm (of which @simonv3 is a core contributor to) as a 501©3 in the US.

Despite what people told me to expect, I found the process fairly straight forward and quick. However, I think that’s because OpenFarm was a brand new legal entity that didn’t have anything weird about it such as a lot of assets, foreign bank accounts, sub-entities, a parent entity, etc. If I recall, there were two form choices: a super complicated one that required tons of information and would take months to get approved, and a slimmed down “EZ” (easy) one that was like 1 page long that would supposedly go through quicker.

I don’t like government paperwork because it isn’t ever clear to me if I’m covering all my bases or doing it right, so I outsourced everything to a company called Rocket Lawyer that specializes in this stuff. I answered some questions online and then they filled out the papers and mailed them to the appropriate places for me. I had to do some e-signatures I think. All in all it cost less than $200 total and I received the official 501©3 recognition from the IRS within a month I think.

The upkeep of the organization hasn’t been much, though to be completely honest I don’t know if I’m doing everything I’m supposed to do. Every year I e-file a few things but it doesn’t take any more than an hour. Another disclaimer: we’re not exactly a complicated organization when it comes to budget, operations, etc, so I’m sure it could take more time depending on how your organization grows. I gather that Open Source Design wouldn’t be very complicated, at least initially.


(simonv3) #20

Thanks for the input @roryaronson!