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

On Thu, Aug 16, 2018 at 12:37 PM Adam Lake <alake@digitalbazaar.com> wrote:

> 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.
>
To be clear, an LLC is allowed to create governance forms that are mission
driven without necessarily being an explicit state “benefit corp” enabled
by legislations. This is historically because LLCs were initially used for
a variety of family and property uses that needed to be long-term. You do
need enabling legislation from a state if you want a regular corporation to
be able to be benefit. This is also distinct from the B-Corp trademark —
even a regular corp can apply and that.

> 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 agree that US is part of the problem, and I my knowledge in this area for
solutions outside US is slight. I know that Italy has something
http://www.societabenefit.net/ as does france (not sure what is called).
There are some other useful forms like “Société Coopérative d’Intérêt
Collectif” which Aeturnum is using in France — apparently then if you do it
in other EU countries you can merge them and be an EU regulated rather than
country regulated entity.

As to what other countries allow the flexibility of ownership that a US LLC
has, I’m unclear on. I do know that the EU has some unusual forms.

> 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?
>
It is not that a non-profit can’t be transparent, but that there are other
forms can also be transparent.

> 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?
>
I don’t know all the issues here, but I had believed them to be difficult,
almost requiring a divestiture and donation to another non-profit.

> 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.
>
Not knowing the specific requirements for each jurisdiction I can’t say.
But I can say that my experience with a couple of US non-profits, in
particular recently the Software Freedom Conservancy has me concerned.

> 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.
>
Thus my abstention rather than -1.

— Christopher Allen