Re: PROPOSAL UPDATED: Incorporate the Veres One Non-Profit Foundation

Hi Christopher,

Firstly, I appreciate you speaking up about this. Always going with what 
seems like the flow won't make for a healthy community so it's important 
for members to speak their minds even in the face of a bunch of +1's.

Also, apologies for making an assumption in the premise that Veres One 
should be a nonprofit.

I did look into the option of incorporating as a Benefit Corp as well as 
an L3C, months ago. The typical type of Benefit Corp is a shareholder 
organization which did not seem like a good fit for Veres One. I 
honestly did not know about Benefit LLCs (thank for the link 
<https://worldpositive.com/a-startup-cheat-sheet-for-the-baffling-world-of-company-structures-3e8bfefd2178>, 
this is something I am very interested in), which are only in three 
states rather than the 30 states that support shareholder Benefit Corps. 
I spoke with the organization that developed the L3C model but they are 
only legal entities in three states, if I recall correctly, and it felt 
sort of new and risky without much precedent.

A problem with both Benefit LLCs and L3Cs is that they are US corporate 
designations. The United States is not generally viewed as a neutral 
arbiter. There is also historical baggage associated with the US 
regarding governance of technical infrastructure for the Internet (e.g. 
ICANN). Maybe a Benefit LLC has it's merits but it's anchored to the US. 
Maybe Canada will have it's own version of a Benefit LLC in Fall 2019.

I get the concern around the regulatory burden of being a nonprofit but 
I don't understand the concern around transparency. What makes a 
nonprofit inherently less transparent than a Benefit Corp? How would the 
Veres One governance model as a Benefit Corp have more transparency than 
as Nonprofit?

The additional costs to incorporate as a nonprofit compared an LLC are 
expected to be around 5K and and extra 2k/year for operation of a low 
revenue nonprofit. Digital Bazaar is covering these fees.

As far as changes to governance, enabling adaptability, isn't it always 
an option for a non-profit to transition to a Benefit Corp, or some 
other type of entity, at a later date?

The only negatives associated being a nonprofit that I can clearly 
identity is the extra cost and regulatory restriction. Some of this 
regulatory restriction can be viewed as a positive as it may help keep 
Veres One focused on its mission. I can also see how the the nonprofit 
designation could constrain adaptability.

Another factor is delaying incorporation further, a negative but 
probably should not have much weight in the decision.

I want what will help Veres One deliver on it's mission and be 
successful. If incorporating as a Benefit LLC is the best approach I 
hope that is what we converge on. For me, the potential benefits of 
incorporating as a Benefit Corp over a Nonprofit don't seem to outweigh 
the negatives.

Kind Regards,

Adam

On 8/16/2018 2:36 PM, Christopher Allen wrote:
> On Thu, Aug 16, 2018 at 11:17 AM Adam Lake <alake@digitalbazaar.com 
> <mailto:alake@digitalbazaar.com>> wrote:
>
>     *Christopher Allen*: 0, Abstain
>
> To be clear, I am abstaining as I don’t believe the best option is 
> either a non-profit or foundation. There are other ways to demonstrate 
> fiduciary responsibility and benefit to the community. The tax issues 
> can also be addressed other ways.
>
> My personal experience with both non-profits and foundations is that 
> they are often not worth the trouble unless there are significant 
> individual patrons that wish to write off donations in their country 
> of taxation, which I don’t believe is applicable to us — corporations 
> can also write off expenses. The regulatory requirements for these 
> entities are also burdensome and limit types of governance and changes 
> to governance models which I believe are evolving right now.
>
> I abstained as feels to me that the decision as already been made that 
> you must form a non-profit or foundation, without sufficiently 
> exploring options for a benefit corp with strong transparent 
> governance, and dealing with tax issues other ways. but “perfection is 
> the enemy of the good” and if the team largely wants to go the 
> “traditional” way I don’t want to block.
>
> — Christopher Allen

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