PROPOSAL UPDATED: Incorporate the Veres One Non-Profit Foundation

**

*The Veres One Community Group is currently discussing the topic of 
where to incorporate the Veres One Foundation. We would like to make 
this decision before we go into production. The original proposal was to 
incorporate in the US because it is the most cost effective and presents 
the least unknowns for those overseeing the incorporation process. Once 
incorporated, we would then move the Veres One Foundation operations to 
Switzerland once the Foundation’s cash on hand hit a particular 
threshold. In response to this proposal, several other countries were 
mentioned as candidates for incorporation. The following details are my 
findings and analysis to date. *

*

UPDATED PROPOSAL: After doing more research into the various country 
options for incorporation my proposal has changed somewhat. I propose 
that we incorporate in Canada to start with and leave the next country 
of incorporation more open ended. Canada may end up being a good long 
term home for the Veres One Foundation. The CG and the Board can decide 
where, when, and if the Veres One Foundation should migrate to another 
jurisdiction at a later date.


Overall, it was not particularly easy to discover the requirements to 
incorporate as a Foundation in the various counties identified as good 
candidates by the group. I have included data points that I was able to 
acquire.


I believe it is important to note that while Veres One is a nonprofit 
that it is also a lean startup. Cost effectiveness and simplicity are 
critical in the early stages. Achieving traction and sufficient revenue 
to grow is the first phase. Once Veres One achieves traction and a 
stable base of revenue, the community and the Board can always decide to 
migrate operations and incorporate in a more preferable jurisdiction.


It would be ideal for Veres One to move forward with incorporation as 
soon as possible as not to miss the target of going into production by 
the end of Q3 2018. It is also imperative that Veres One become an 
independent organization and that decision making authority related to 
governance be separated from Digital Bazaar.


The country of incorporation provides a legal framework for the 
organization to operate but it does not have a lot of weight in shaping 
the character of the organization. The Community, Advisors, the Board, 
and the Foundation’s governing principles shape the character of the 
organization. While the country of incorporation is important it is not 
likely to determine the success of the project.


Following are the notes on the costs and considerations for 
incorporating in each country mentioned. Note, all cash values are in USD.



Canada


Costs: Startup, $5K-10K, more likely closer to $5K, with assistance from 
an Canadian law firm.


Operating, $5.5 - $7.8K at most for first year, less after that because 
we will better understand the compliance requirements and won’t need as 
much legal advisement.


Tax Rates: Tax Exempt, but we can’t issue tax receipts to individuals. 
Organizations and foreign foundations can still donate to the Veres One 
Foundation and write the donation off of their taxable income.


Familiarity: Familiar, we have a point of contact and an advising law firm.


Neutral: Yes


Stability: Excellent


Human Rights: Excellent


Pros: One of the positives of starting in Canada vs the US is that we 
may want to continue operations there, whereas if we incorporate in the 
US we expect to later transfer operations from the US to Switzerland or 
some other country.


Cons: $2K-$7K more to incorporate and $4.5K - $6.8K more to operate in 
first year than in the US.


United States


Costs: Startup $3K, Operating $1K/year


Tax Rates: Tax Exempt


Familiarity: Very Familiar, fewest unknowns


Neutral: Somewhat


Stability: High, but potentially litigious


Human Rights: Good


Pros: United States is an attractive option because it is familiar to 
those that will be incorporating and administering the Veres One 
Foundation and because the startup and operating costs are low.


Tax exemption is easy to obtain, good for early donations if the 
opportunity arises.

Political concerns should not affect the Foundation.


Incorporating in the US where startup costs are approximately $3K and 
operating costs for low revenue foundations are less that $1K per year.


Cons: The United States is not generally viewed as a neutral arbiter. 
There is historical baggage associated regarding governance of technical 
infrastructure for the Internet (e.g. ICANN)..



Estonia


Costs: Startup, ~$1000, includes drawing up the articles of association 
and other documentation as well as state fee, does not include 
applicable translations. Operating Costs, $8.4K-$11.3K/year


Tax Rates:20% VAT, would likely get tax exemption


Familiarity:Somewhat familiar, some unknowns


Neutral: Yes


Stability: Good


Human Rights:Good


Estonia is not known for being a neutral country or for its civil rights 
but there doesn’t seem to be any red flags or concerns in these areas 
either.


Pros:Estonia is increasingly known for its innovation in digital 
services including it’s eGovernment  and eResidency programs. Veres One 
being incorporated in Estonia could increase the chances that the 
Estonian government would use Veres One identifiers but country of 
incorporation is unlikely to be a significant factor in their adoption.


Incorporation can be settled in a matter of days once all the paperwork 
is prepared.


Cons: Tax exemption is likely but not guaranteed.


Estonia has not automated, through their eGovernment services, all 
aspects of starting and operating a nonprofit Foundation like they have 
for for-profit entities. This means that some of the administrative 
tasks such as filing certain documents and bookkeeping would need to be 
done within Estonia. This results in higher costs than what was 
previously estimated when we thought we could start and operate the 
Foundation exclusively through their eGovernment services.


If all board members are foreigners, appointment of a contact person in 
EE is required.



Switzerland


Costs: Startup, $65K Operations, $10K/year


Tax Rates:Tax Exempt within 6 months


Familiarity: Not particularly familiar but have done a lot of due 
diligence and feel comfortable with incorporating here if we decide to


Neutral:High


Stable:Very


Human Rights:High


Pros: Switzerland is globally viewed as a neutral country and is home to 
many international non-profits and UN agencies. Swiss cultural support 
for civil society organizations is strong.


They have been easy to work with and I feel comfortable executing on 
incorporation in Switzerland if and when the Veres One Community decides 
that it's the appropriate course of action.


Cons: Swiss incorporation requires $65K USD in startup costs and up to 
$10K USD per year in operating costs. This includes $50K for a capital 
requirement that could be placed in a Swiss bank account and used for 
operations.


Swiss incorporation also presents additional regulatory risks since the 
Maintainer/Founders (Digital Bazaar) are US-based and the nonprofit 
Foundation would be Swiss-based. The risks are minimal and the 
additional costs are not astronomical but it would be far more lean and 
cost effective to incorporate in the US or Canada, or Estonia to start 
with.



Liechtenstein


Costs: N/A


Tax Rates: N/A


Familiarity:Low


Neutral: Good


Stable:Very


Human Rights: Good


Pros:Liechtenstein has a favorable environment for blockchain and 
cryptocurrencies.


Cons: It is a monarchy which does not send the right message for a 
multistakeholder global public utility.



Iceland


I had trouble getting information about Iceland. I could not find basic 
details about starting a Foundation in Iceland. The attorneys that I 
corresponded with were not willing to provide me with many details 
without first giving them a retainer. It does sound like it is possible 
to incorporate the Veres One Foundation there but it’s unclear what 
value Iceland provides over other countries that would be worth going 
through the extra trouble and costs of incorporating there.



Umbrella Org, Internet Governance Forum or Internet Society


The idea of operating the Veres One Foundation under another foundation, 
more specifically the Internet Governance Forum and the Internet Society 
was mentioned. The advisement I received on this option was “ whether 
the Veres One Foundation could be incorporated under ISOC or the IGF: 
the answer to the latter is not, as legally this would not be possible 
(the IGF has no separate legal entity - it is a platform convened by the 
UN Secretary-General). ISOC could be an option in theory, I suppose, but 
it would be too mind bogglingly complex to consider.


Multi-country


It is an option to incorporate the Veres One Foundation in multiple 
countries. This is more of a phase II option.

*

-- 
Adam Lake
Director, Business Development
Digital Bazaar
Veres.io
540-285-0083