Marshall read out the mission of the committee.
Committee is for the discussion of long term goals, it is not a decision maker.
With that in mind, we’ve looked at the agenda items and we are still looking at research which has been parted out to a bunch of people - who aren’t here and who gave stuff/docs.
Before we review items, attend to one of the bigger problems.
What are the problems with the space?
Pass the stick.
Joe - The move or the choice to spend a lot of money on moving should not happen without completion of the work of this committee. This committee defines the model of the monetary and work investment for the future of the space. The reason that Joe joined this discussion is that the definition of equity in the space is not clearly defined.
John - There is a disassociation between the LLC and the membership - there’s also a potential conflict of interest between at least one member of the LLC and the interest of the space as a whole. The committee was formed to bring these things out and make sure everyone who has an interest in the space moving forward can have a voice.
Nathan--- We need to totally abolish the LLC and change to a 501c and get this together and do this ourselves. Make the space ours, so that our voices mean something - our stuff gets lost. The LLC does it’s own thing.
Mert - Things were set up in the beginning as a small group based on personal trust. Now we’re nearly 100 people and that system isn’t working as well now as it did back then. Now that we’re a larger group and everybody doesn’t know everybody else.
Danny - We’ve run out of functional space here. We need to move into the bigger space. We talk the option to death. Is our model raising enough money for what we need to be doing?
Eric - Finding ways that people can effectively contribute to the space, whether that’s financial contributions or donations of money or time. People should be able to do that and feel good about that. There are certain activities that we do that work well for the equity model and certain things that work well for the donation model.
Marshall - One of the longest and largest discussions we can make is what kind of a corporation we could possibly be.
Mert - 501c3 - details on the wiki. Advantages and disadvantages discussed in detail there. There are are a few terms that we need to define. “Non-profit is a relationship between us and the state of Texas. Tax exempt organization is a definition between us and the IRS. There are many different types of tax exempt organizations. charitable organizations, etc. People who donate will get a tax break.
--- Do we have to do charitable work?
Martin talked about a blended model - Mert is discussing only the 501c3 portion. We have to limit our mission to a non-profit mission - charitable, educational or scientific mission. Any profit has to go towards the non-profit mission.
Any assets that the 501c3 has must be irrevocably given to that mission - if we were to disband the things have to go to another 501c3 or to the government.
There are a number of logistical concerns - money, time, etc. Nevertheless, this is a feasible option for us - but we’d need to decide whether it would be worth it.
-- can someone come here and work on something that makes money? Individuals can make money - the hackerspace as a whole can only give money back to corp.
Martin did a bit more research. If someone uses the space to make a profit and are using the resources of a non-profit to make a profit. If they get audited, we get audited. A good example of this is the people who are part of the fair trade organizations for coffee in South America. The organization here is non-profit, but since they’re coordinating a non-profit activity. Auditing exposed a profit making activity that the organization got in trouble for. It’s not that far a stretch to say that someone comes into the hackerspace and starts producing thing X and get this same thing.
-- Can we incorporate as an incubator space?
Non-profit R&D places exist - you can own and sell your idea, they get paid a royalty. There’s nothing wrong with making a profit when you’re a non-profit organization - what you do with it is the important issue.
Eric - I did a little reading about what gets people in trouble with 501c3s. “Non-arms-length transaction” - someone commercially using the laser cutter might have to be charged a standard rate, to avoid.
Joe - Would like to see if an incubator model would work with this?
Mert - 501c3 cannot participate in any way in helping a candidate or influence legislation - they are allowed to participate in a nonpartisan manner to educate.
Marshall - We’ll come back to this topic.
A little report from the coop investigation. The only thing that is on the wiki is the law itself. What we’ve found out from the coop this far. Black Star coop is an example of how the membership is established. Each shareholders has one share and all shareholders have equal power. If you happen to have more shares as a later time, then you have a larger stake into dividends or reinvestment into the enterprise or give back. This sounds alot like our model. One of the biggest problems we have is the disproportionate shares.
Joe - Tax question. Same tax benefits?
Matt - for example, if you’re a member of REI which is a coop, there’s no tax benefit.
Marshall - the purpose of a coop is to have a member owned and coordinated organization. There are certain mandates about how this organization is run.
Martin - Is an LLC allowed to convert into a coop?
Marshall - don’t know, needs further research.
-- there’s a place on Manor road that has a coop business instutute where they have classes teaching people how to form coops
Martin - Answered my own question. “What is a worker cooperative?” “Why make it an LLC?” A Coop can be an LLC.
Marshall - Problem with a coop - presently the LLC holds the liability. Would be distributed.
Nathan - Directors can be pinched if illegal activity comes out.
Martin - Lawyer’s summary: A worker coop may find an LLC advantageous because it limits the liabitiy of the owners. In a LLC, members may only be liable to the extent that they agree to be liable for the debts.
Joe - There were concerned that if we have a lot more members we have a lot more difficulty getting insurance, etc.
Martin - It gets a lot harder because even if you have a coop board for example, everybody who is on our LLC had to sign all the papers. An LLC coop would have a mandated executive. Each business makes risk assessments based on a company’s status.
Joe - Is the risk mitigated by the assets of the coop?
Martin - Yes
Marshall - Anyone who would be willing to help Matt & Brandon to go over the coop LLC structure?
Paul - Aye
Martin - LLC plus 501c3 - For an LLC to convert from one to the other, if you can answer 12 questions, they can become a partner with a 501c3. The business of the LLC and the business of the 501c3 must be separate. The charity must operate as a fully independent arm. As far as the government is concerned - as long as the 501c3 has a choice to walk away and its major charitable business is not controlled by the LLC, then they’re okay. The IRS makes an LLC guide sheet that discusses these.
Mert - When you mentioned that the LLC could become a 501c3, I was concerned. Members versus organization members?
Martin - The LLC may meet the first 11 requirements through the language of their bylaws, etc. The same thing comes true if it’s going to subdivide. You can move assets from an LLC into a 501c3.
John - We don’t want to convert into a 501c3 because we can’t do it. We’re not at a good place for making this conversion because we’re not at a massive shift. We don’t have the assets to do this either - a hybrid is really the only thing that’s going to work right now.
Joe - Agree on the assets, we don’t have the assets to support a charity right now. But we don’t have to have them immediately - we can figure out where we want to go and make a real road map to get there. What we’d need to understand is not what do we need to operate tomorrow - but where do we want to end up? What is the advantage of the dual type partnership?
John - Assuming that we want to get away from 3 people who are liable and who have ultimate veto - the question is 501c3 which is non-profit or cooperative - where we want to make a little bit of money like REI and want to be a group of guys having fun.
Paul - The group of guys want to have some kind of real control over what happens at the space.
Joe - It’s not so much control as it is equity. Time, donations, space.
John - Allocation of assets and accountability - need to separate from transparency - do we want to have things.
Nathan - The problem with the 501c3 is the assets, who does the things belong to?
Martin - The idea that its only 3 people is not the case - we can continue to expand and we want to expand. The LLC can become however many people want to have a stake in the space. The model doesn’t cause equity to occur, it’s what you decide to do.
Joe - the 501c3 solves a different problem because we can get assets donated.
Martin - We can have donations, we just need to be non-profit. LLC organizational detaills. Asset allocation also known as partner equity. There are two different things going on - while they are high, they are not ridiculous. A lot of Martin’s contribution is tied up in the deposit on the space. For people to buy in, we can just get rid of the concept of the “minimum share.” We can just switch to a full partnership equity model, money in, money out.
-- How much money is in?
Minus the deposit, contribution is...
Martin: $17,500, Matt $5,700, Mike $1800
The reason that is - the dues that the LLC members are partner equity. Martin gives $300 a month as his dues, other LLC partners are $75 a month as dues. Fridge, sink, etc. - paid for directly
Mert - If the LLC needs to take a vote among themselves to decide an issue, are the votes equal or are they proportional to the investment?
Martin - the distinction is artificial, but it’s 33.3% per person as outlined in the bylaws
Marshall - If we have a buy-in option, which is essentially to buy in to the space and a sell-out option, how does that work?
Martin - Equity in the space, dollar for dollar value. It’s recorded in taxes and each partner’s equity value is tracked year to year in the taxes. That’s up to each person as to whether or not they decide to accept a buy-out.
Marshall - To highlight this - the proposition for buyin or buyout is actual equity and we know what those investments are, so we can easily convert to shares/stake.
Mert - Are there provisions in the LLC’s formation documents in the case of the death of a member? Normally a partnership dissolves on the death of a member. That’s one of the reasons to form a corporation.
Martin - There is no provision for death, probably worth an amendment.
John - Regardless of path forward - we need to potentially make a rider or something to the current bylaws that handles people’s donations to the space and how that’s handled. That needs to be defined with writing, for the protection of the members. If we do decide to continue on with the LLC, the potential for profit could conflict with our potential bylaws. One of the things I was going to suggest was to move. The board would be independent of the LLC, the LLC would not retain positions on the board, preventing conflict of interest.
Marshall - There should be discussion on the mailing list and reporting on the wiki. We’ll continue to go over all these organizational problems every week until we settle on them. There are couple big ones that happened at the last minute that are huge. One was Jeff’s discussion of what we’re going to solve with the changes. Evaluate these ideas on a performance basis. Coop, Space Federation, Housekeeping, Income opportunities, Separating on a purpose basis, mission statement
Trying to talk about the scope of the FOTSC, all these things are within our scope to talk about - but our end goal is to offer options that have been discussed.
Martin - Closing remark. This all started because we all feel that there is a problem in the space and one of the things that has been made clear is that we haven’t done all of the community work that we originally started off to do. And that is as much the business of this committee as anything else we would be discussing.
Joe - What are we, how do we fit within the niche of the other spaces in Austin? Are we a community space? Are we a bunch of people who help you solve problems? Do we have a mystery machine? There are a lot of visions that could potentially be here.