Setting up an official non-profit organization?


(Jan-Christoph Borchardt) #1

At the last monthly Open Source Design call it was @moritz and me talking about the question of setting up a non-profit again. I’m opening this separate thread so it’s not bound to the other discussion. :slight_smile:

Here are my notes from the meeting:

NON-PROFIT ASSOCIATION

  • What do we want to do?
  • How do we do this organizationally?
    • Difficult for big donor organizations to donate EU → US and vice versa
    • Small donors mostly don’t care if it’s tax-deductible
  • Could bring more drive
  • Useful in any case: Satzung/bylaws – possibly found at Open Source Design Summit

E.V. (registered association in Germany)

  • At least 7 founding members and enough board members. To the outside each board member should have decision power.
  • Founding is possible quite quickly, there’s even an intermediate state. Normally 2–3 weeks.
  • Bylaws are quite easy to write.
  • International members and board possible. But have to go to the notary initially to get identity confirmed, costs just 70 € for everyone.
  • Yearly meetings with minutes, need to be signed by everyone.

501©3 (in the US)

  • Seemingly easier to set up but a lot of drawbacks.
  • Not really monitored, unlike in Germany with a tax authority.
  • Could take up to a year or longer to be accepted.
  • Need to get a lawyer for everything and it will cost around 1000–1500 $.
  • Board members can be international as well.
  • No member structure though, need to set up a supporting membership through donations for example. That doesn’t automatically give people voting rights though.

If I missed something, maybe @moritz can complete.
cc @evalica @simonv3 @belenbarrospena @bnvk @victoria-bondarchuk @mkfnch @ei8fdb @jdittrich @Incabell


Monthly Open Source Design call
(Belen) #2

Thanks for posting those!


(Mike Finch) #3

This is SO helpful.

Regarding the costs/effort with U.S. non-profits, there are services like LegalZoom (https://www.legalzoom.com/business/business-formation/nonprofit-overview.html) that would make this significantly easier than using a traditional lawyer (and much, much cheaper- https://www.legalzoom.com/business/business-formation/nonprofit-pricing.html)

I’m curious if @moritz is familiar with this and what his opinion is on this. It seems like they cover everything we’d need for less than $500 USD and could have everything filed and completed within 7-10 days. Thoughts @moritz?


(simonv3) #4

^ can you elaborate on this a bit @jan or @moritz?


(Elio Qoshi) #5

What are the benefits of being registered? Is there any specific reason we are looking into this now? I mean we don’t have that many resources right now and as it seems, registering as a non-profit organization seems to require quite some time and money investment (which we don’t have as of now, and if we would do, it would make more sense to me to allocate them elsewhere).

Debian is not registered anywhere and they are doing fine by having partner organization which handles finances for them (Software Freedom Conservancy).

I’d be positive on registering as a German E.V as it seems to quite straightforward, but I don’t see why doing anything else (at least at this point in time)

This is something we need to discuss at the summit as well.


(simonv3) #6

The reason for registering as anything is largely so that we have some form liability assurance. If OSD gets sued for whatever reason it wouldn’t be Jan who’s specifically liable.

An other thing to consider is that there’s orgs that take you much more seriously (and are more likely to let employees contribute on their work time, or donate money, etc).

But yeah, I don’t know if we need to be both a US entity as well as a German E.V. at this time.


(Moritz) #7

@mkfnch: I only know very little about the US end. $500 might be sufficient, but I honestly don’t know if that will cover all the costs associated with the establishment. The LegalZoom fees are on top of other costs that will arise, and – as far as I understand it – the IRS takes quite high fees (relative to Germany). In any case, if you’re interested in a US non-profit, you should find people with more expertise than me before you do it. I doubt using some online service will do you any good in the long term. I am not a fan of boilerplate entities. Every legal entity should be designed around your requirements, otherwise the legal entity will end up designing you.

@simonv3: For any legal entity in Germany, the executive board/directors have to have their identity and address confirmed by a notary. The notary will send the data electronically to a public registry. The way you usually do this is that you get an appointment with a notary on the same day or the day after the initial founding meeting, and the elected board goes and gets their identities confirmed (with their national ID or passports). Alternatively, each board member can go to separate notaries. I don’t know how this works for board members who are not in Germany, but legally, board members do not have to be German residents. Maybe there’s a straightforward way to get your identity confirmed outside of Germany that is accepted by the German registry, but it might not be as cheap as in Germany itself (since establishment of associations is ‘subsidized’ by law).

This discussion is getting lost in technical details. (All of) You first need to figure out why you want a legal entity, and what purpose it would serve. The theoretical threat of “getting sued” (for what?) sounds like a very weak argument. I don’t know and don’t wanna know about the US, but people in Germany are not getting sued for random stuff, and costs of legal representation and fines can be considered reasonable. We’re trying to get along with each other and not building fortresses. If anything like this should happen, we can still collect money to help Jan (or whoever) fight off the hypothetical evil guys.

There is an argument to be made that a members association can lead to a more active community, and projectable income thanks to membership fees. However, probably people won’t care or at least not know the difference to a “membership” via patreon and the like.

What would you do with money? How much do you think you need? What’s the exact value proposition?