I'd like to start a discussion around whether the Twin Cities Drupal community would benefit from forming a non-profit corporation, in particular for the purpose of organizing and funding the annual DrupalCamp Twin Cities, but more generally for promoting Drupal, and for supporting other Drupal events around the Twin Cities.
To my mind the most important reason is monetary: as a corporation we would own our funds, keep our own checking, savings, credit, and investment accounts, write our own checks, and pay our own debts. Currently, the Drupal Association handles our funds on our behalf, and it sounds like they've been good partners. However, they also take a percentage of our revenue (do I remember 10%?), and if we lapse in putting on DCTC, we could lose all our funds to them.
Incorporating would also create a more stable structure for supporting DCTC in the future, and would also foster a sense of stability in the broader community, which might help when asking for support from sponsors.
The downside is that incorporating involves some work, most significantly applying for tax-exempt status with the IRS. It's also a significant change from the current informal culture which has actually worked well so far.
Personally, I'm in favor of incorporating, and I'm willing to spend time on it. What do others think?
Comments
non-profit status
A quick thought: is everyone involved aware of the requirements regarding board and governance structures for a non-profit? They are non-trivial.
Somewhat! Though I think it'd
Somewhat! Though I think it'd be very helpful to have some points listed on this page if you happen to know any.
As for filing with the IRS, I'd agree that it's also non-trivial. Though there are groups like MAP For Nonprofits (http://www.mapfornonprofits.org/) that could help with the technical parts for $900.
Can anyone give a ballpark for how much per year 10% of revenue works out to be? About how much would we be "saving" by going our own way? Would there be other benefits that others can think of? Would vendors (for venue, printing, tshirts, etc) offer larger discounts if we're our own non-profit? What about office/supply shops around camp time?
--
David Needham
Team Lead of Training at Datadog
Filing as a non profit
Although I may be getting this out of context filing with the IRS is simple. You can do it online or in a 2 minute phone call. Very simple: You give you them a name and they give you an EIN and you are done.
Filing with the MN SOS is $70 and is just as simple. You just need the names and addresses of the people that will be on filing. 2 or 3 is sufficient. A short paragraph for the Articles of incorporation is simple what your "purpose" is.
Filing for IRS tax exemption may be more difficult
I've never done it myself, but the impression I get from others is that filing for a tax exemption is a lot like drafting a business plan: where do we get our money, how much money will we get, how will we spend our money, how many employees will we have, how much will we pay them, etc. I think this is where most of the work will be.
I think setting up the non-profit could be straightforward, and I think that for a small non-profit, the annual reporting requirements are pretty simple.
Non-trivial how?
I've served as officer and board member on a small non-profit. It didn't seem burdensome. What are your concerns?
The Minnesota Secretary of State has some good information on setting up a non-profit: http://www.sos.state.mn.us/index.aspx?page=92.
So does the Minnesota Council of Non-Profits: http://www.minnesotanonprofits.org/nonprofit-resources/start-a-nonprofit.
Challenges
For the last four years, I've been on the board of a non-rofit that runs a web conference as well as a member association and am now the President of the org. We are also trying to support the start of a 501(c)3.
Your mileage may vary, but running a non-profit is very much non-trivial. Applying is one thing. Waiting another. Running the org yet another. Setting up bylaws, election procedures, filing taxes, posting your 990s.
It can all be worthwhile depending on what you are trying to do. Is the goal just to get 10% more conference revenue? How much is that and how would it compare to additional expenses you might need to cover if the Association isn't handling things. What does the DA provide for that 10%? How would this affect things like sharing session recording equipment? After all that remains of that 10% after looking at what DA did, what remains for annual operating expenses unrelated to the conference?
Anything is possible given time and effort but ask very carefully why you want to do this and look at the fiscal consequences before moving forward.
That's my take at least.
Non-profit
You mileage will vary is quite true. I have formed two non-profits and three companies. I have also sat on the boards of other organizations. The bureaucracy can take many forms.
A Bike Task Force I was part of for a while has 18 pages of bylaws. The funny thing is it was not even a non-profit, nor chartered through the city. It wasn't anything and had no protections. If a kid somehow gets hurt at a Bike Rodeo the lawyers will go after the deeper pockets of the anyone that had anything to do with it. I would not have anything to do with it.
The bylaws of one of the nonprofits is a single paragraph. "We formed to serve these people in whatever way we deem appropriate". We meet as a board maybe once a quarter.
We are not a 501c3 because there is no point for us. Our revenue comes from companies that want access to our members. They don't care if we are a 501c3 as they deduct the sponsorships the same way they would deduct the cost of a billboard. If you are looking for "donations" from individuals as a major source of revenue then consider 501c3.
The point is it is very simple and only becomes complicated if you make it so. If you make it complicated I would hope it would because you have good reason to. If you have good reason to then you should probably be incorporated as a nonprofit.
The broader issue of how we organize ourselves?
In my mind the idea of incorporating - is one possible outcome of a broader discussion about how we want to organize ourselves locally?
While the Twin Cities Drupal group has had great success at camp organization, I think that there is some question about whether or not we could be more effective for the rest of year - in terms of promoting Drupal, scheduling events, and organizing opportunities to contribute to Drupal code.
Our current model of organizing is very open source / ad hoc. If anyone wants to do something, they simply step forward and do it. While that model works really well for some people, I don't think it works for everyone. I suspect that there are folks in our community with ideas that they might be interested in trying or promoting, but aren't sure where to bring them or who to propose them too.
The "coordinating committee" meeting that we initiated last week is one step towards addressing that. It's still very informal and ad-hoc, but at least it provides a time and location where people can bring their ideas or questions.
I'm really interested in how Drupal groups in other cities or regions organize themselves?
I found this interesting document: The Official Governance Policy of the Greater Los Angeles Drupal group = https://groups.drupal.org/node/219129/og-panel/6
I found this website for the Atlanta Drupal User Group - it looks like it's fallen out of date.
http://www.drupalatlanta.com/home
This still looks active:
http://www.meetup.com/drupalatlanta/
I'd like to frame this discussion about incorporating around the broader issue of whether or not we might like to get more "organized" in the Twin Cities.
Personally, I'm very interested in the idea - but not sure whether or not it's necessary. I'm very interested in what other folks have to say......
Tim Erickson
Triplo
Organizing vs. Incorporating
I support the suggestion to broaden the conversation to how folks want to organize within the TC. I don't think it is wise to do organizational planning and let the "statute be your guide" - though, it is worth noting that there are incorporation options outside the non-profit vs. for-profit paradigm, as well as more subtle distinctions within that paradigm. Still further, you can also select a standard corporate form (e.g. LLC or 501c) and operate in more specific ways within it via your Bylaws and Articles. For example, there are many cooperatives in the US that incorporate as an LLC, but operate cooperatively.
To this end and at this stage, I would suggest thinking about some key questions about the goals and needs of the group, and less about what corporate form seems best.
Q: What are or could be the main activities of the group?
A:
(e.g. Annual-ish event, trainings, mentorship network, etc.)
Q: Who are the stakeholders?
A:
(e.g. Drupalistas in TC, event attendees, larger Drupal community)
Q: What is the role of membership?
A:
(e.g. Drupalistas could be members)
I could definitely add more to this list, but I'll leave it here for now. I'd definitely follow-up, too, if someone started a new thread with the broader scope. As I just moved to MPLS and am new to this group, I don't think it is appropriate for me to initiate such a thread.
In cooperation - EMLC
EMLC
Cooperative Organizer
about.me/eamlc
Organizing vs. Incorporating
If the only reason for creating a non-profit org was to manage the finances of Drupal Camp, I'm not convinced it is necessary or worth the work. However, I would not stand in the way of anyone who wished to move that direction.
However, if incorporating also has other organizational benefits - I might be more enthused.
Here are some questions I'd like to hear comments on:
1) If you support forming a non-profit: do you see any other non-financial benefits?
2) If you are leaning against forming a non-profit:
- Do you think we can or should be doing more in the Twin Cities?
- Are there other "organization" changes or improvements that might move us in that direction, short of forming a non-profit (or is our current ad-hoc structure working fine)?
3) Everyone/anyone: Given the status quo - who is authorized to spend money and/or make financial decisions on our (the local communities) behalf?
Tim Erickson
Triplo
Sure - here's my take:
2a. Sure!
2b. I do like the idea of a quarterly steering committee meeting as put forth at the Blue Nile last week. That seems like a great step in the right direction. (See https://groups.drupal.org/node/359543)
In terms of the tools we have to spend money, I have a credit card in my name that is paid with TCDrupal money. That's generally been the preferred way of making purchases, but we always have purchases made by others every camp that are then reimbursed. The DA does ask that a local representative confirm reimbursements to prevent against surprises or fraud. Historically that has been me plus the camp PM, but if we wanted to swap me out with someone else, we just need to make that call. I'm in the mix because folks at the DA know me and accepted my personal guarantee (professionally + financially) to not abuse the position or mis-spend funds.
But, we've never really discussed any of this, so it's entirely possible that the whole thing is totally opaque. Perhaps a discussion of finances, balances, etc. during any quarterly meeting would be a good standing agenda item?
DA Costs / Benefits
I can't speak to any of the difficulties (or not) of setting up our own 501c3, but I did have a chance today to go back and look up our finances and arrangement with the DA. I also spoke briefly with Keri to work up a list of things the DA provides for us.
DA Costs
Our DA arrangement is that we pay 10% of our receipts. This last year had our highest income at $16,359.69. 10% of that comes to $1,635.97. DA reporting has improved dramatically in the last year or two, so I had trouble finding exact numbers for 2012 and 2011, but I believe 2012 income was around $12k and 2011 was a bit lower.
DA Benefits
In return for this, we get:
I also think it's a benefit that our 10% is going back into the global Drupal wallet to be used as needed (as opposed to an accounting firm, McGiantCorp.biz, etc.) I personally think that this is a Good Thing, but given the context of this thread I suppose that could be debated.
DA Caveats
I can think of only two strings attached beyond the 10% fee.
My Opinion
I really, really like having an independent, professional, audited body handle ALL of our finances. If we were to change from the DA, I'd definitely push for professional accounting services. It's very important to me that we are good stewards of these funds - they've been given to us in trust and we owe everyone involved to maintain oversight. Paying a sum each year to the DA to do this is incredibly worthwhile, and quite reasonable when compared, for example, to what a company pays just for tax services.
I have a lot of respect for everyone involved in this conversation. I personally don't see how this adds up in terms of either money or - perhaps even more importantly - time.
Someone once told me "You can pay too much for money". This feels that way to me.
Drew makes some very good
Drew makes some very good points here - I know I missed the initial discussion, but so far the only reason I've heard to forgo the DA are 10% of costs and the chance we could "lose" our surplus if not used. I don't see us not using our surplus, and the cost does seem to be a fair exchange of services.
Dan Moriarty
www.electriccitizen.com
I found support from the Drupal Association to be very valuable
As the cat herder for Drupal Camp last year, I worked closely with the Drupal Association (DA) and experienced what they offer camp organizers first hand. My experience was very, very good. The folks at the DA were remarkably helpful. Awesomely helpful. I consistently got quick answers and turnaround on requests from staff at the DA, particularly in the accounting department. I'd ask for a report and have it within an hour or less. I never had to worry about reimbursements for volunteers or manage the associated paperwork. There were several times when I needed the DA to call someone who couldn't make a transaction work through PayPal. Those folks got prompt service.
How often do people make you feel like you are the only customer they have? The DA made me feel that way every time I needed something. I really value that level of service, and it made organizing camp much, much easier.
I'm keenly aware that we have the luxury of a healthy balance of funds ($15K) at the DA. All sponsorships (donations) were made to our fiscal agent, the DA, not to "Twin Cities Drupal Users Group." There's no guarantee that we would be able to access that pot of money if we are a separate nonprofit. Frankly, I don't know that we could replicate last year's successful camp if we were starting from square one, err, square zero.
(FYI -- $15K is about what it will take to replicate the 2013 camp in terms of location, on-site food, a few travel scholarships for out of state speakers/sprint leaders, free social events, signage, etc.)
I agree that more structure and organization within our community is a good thing. But, I don't see how creating a nonprofit advances that goal. I think the steering committee is a great step. Maybe we also need create more specific ways to get more people involved? WARNING: 2014 Twin Cities Drupal Camp planning will be starting up soon. :)
I'd welcome clarity around the problem we are trying to solve. What needs improvement? I know my focus area is narrow (camp, Camp, CAMP!), so I likely lack a fuller perspective.
My thoughts -- leaning nonprofit incorporation
Thanks for being so willing to enter into this discussion everyone! It is a sign of a healthy community. I agree with most of what's been said (on both sides of the should-we-nonprofit-or-not question). I believe that governance, not the 10% financial piece, is the most important factor to consider.
Informal decision-making and organizing has worked well for us but it will not forever be this way. As soon as we have any conflict, we open ourselves to at least fracturing if not deeper trouble.
I believe establishing a formal or semi-formal governance structure is important at this point in our evolution. It will help create mechanisms for both decision-making and organizing that will be more inclusive and trustworthy to the community we're trying to solidify and grow.
That said, I'm all for something less corporate, more cooperative, as EMLC suggests, if this fits us better. We needn't lose our culture in this effort but we definitely risk doing so if we remain loosey-goosey.
Regarding the DA arrangement:
I agree that their services are excellent (essential these past 3 years) and that our payment for those services have been reasonable and contribute to a cause we believe in. However, it is not assured that the DA will continue to offer these services. They've waffled on this in the past. We also cannot count on the terms of this service always being as favorable as they are now. While we have input into this as DA members, I'd rather see us be in a better position to be autonomous before it becomes necessary -- even if we hope and think it won't.
Whatever we do, if we discontinue using the DA, we should certainly pay for accounting services (no matter what structure we assume). I agree with Dan and Drew that trying to be our own accountants could be disastrous.
Regarding the effort to become structured and maintain a structure:
I don't think that the time to file for nonprofit status nor the time necessary to maintain the governance and oversight necessary would eat into our ability to do the work we want to do and even expand the amount of activities. To the contrary, I think the structure would likely force us to be more efficient about organizing and result in more activity rather than less.
Bottom line conclusion:
I think nonprofit status would be a good move for us. But I'd settle for an alternative situation where we:
The process of becoming a nonprofit would force and legalize the above but I believe these will be important regardless. A cooperative or less formal operating structure would work, too. But something should be set up.
I've been involved in too many groups where serendipity -- like we have enjoyed as a result of our camaraderie and hard work -- is destroyed when unfortunate (but inevitable) conflict (or overall apathy/burnout) blindsides the group which is unprepared to deal. Look no further than the history of the DA board for what could have ended up being a painful cautionary tale.
Thanks again for getting this rolling.
Barry Madore
Triplo
Minneapolis-St. Paul, MN
Has anyone considered a group exemption?
Am just catching up on this and it's a fascinating discussion. Want to throw an idea into the mix: rather than forming a nonprofit which is entirely separate from the DA, consider the possibility of establishing an entity which inherits tax exempt status via the DA's 501c3 "umbrella" a/k/a Group Exemption Procedure.
The national nonprofit for which I work has this relationship with our state and regional affiliate councils. Honestly I'm no expert (our finance director could explain in far more detail) but can outline the basics: our affiliate councils are semi-autonomous entities, they adhere to certain basic criteria to retain affiliation, but they have their own governance, some have their own bank accounts and part-time staff, and none have to fill out a 990. Instead they fill out a far less rigorous annual report to the national office, and we report them on our 990 as entities covered under the group exemption.
I did a quick check and found that two very big nonprofit technology benefits are available to organizations covered by group exemptions: software donations via TechSoup, and the Google for Nonprofits program. (Consider for a moment the potential for expanding TC Drupal's reach through up to $10K per month in free AdWords credit.)
Now I get that this would not provide the type of autonomy from the DA which some have been discussing here, in fact it would strengthen the tie to the DA. And it would require a measure of work on their behalf to cover the local entity under a group exemption. But that process shifts most of the administrative burden for maintaining nonprofit status to the national entity while still providing the local with many of the benefits of incorporation.
For reference, here's the IRS regulation: http://www.irs.gov/irm/part25/irm_25-007-003.html
Does the DA have an affiliate program?
IANAL, but I think this affiliate exemption still requires us to incorporate. It just makes it easier for the corporation to get 501(c) status. Which may be the way to go. The DA would also have to be willing to give us an exemption letter, which might not be a problem.
As the one who brought this
As the one who brought this up, obviously I think we should do it, although I take it as obvious that we shouldn't do this unless there's some good consensus, and that this shouldn't in any case be allowed to interfere with putting on the next DrupalCamp, which is the main priority. Also, there's no urgency - we can take as much time for this as we need to get it right.
Incorporation is not about declaring independence from the Drupal Association or going our own way, but just the opposite. Our purposes are so close that wouldn't make sense. Incorporation is about becoming a partner who can support the DA, instead of a dependent who needs the DA's support. This should be good for them as well as us. The DA has global concerns, and we're just a speck in their world. I suspect we do them no favors by needing their help.
As far as governance goes, we can organize ourselves pretty much any way we want. Legally, we only need Articles of Incorporation, which only need to give our name and contact information, and the names and addresses of the initial board of directors. Everything else is whatever we choose, and we're already doing everything we'd do as a corporation anyway: regular meetings, (s)elected officials, meeting minutes, subcommittees, financial updates. Like the scarecrow in Oz, the only thing we're missing is the papers. So "governance" doesn't need to be any except what we already do.
The annual filings would actually be pretty trivial, should easily take less than half an hour once a year, and can be done online. The IRS will require us to fill out 990-N, which is basically a single checkbox that says we took in less than $50,000. The state will require us to file an annual renewal, which is one page and only asks for identification and basic contact information.
About managing money. The DA gives us monthly statements, but so does the bank. The DA responds quickly to questions about our money, but not as quickly as logging in to our own bank account. It's reasonable for the DA to claim 10% of our revenue for their service, but still that 10% is well over a thousand dollars, it's an entirely unnecessary expense, and it's money we could well use. That 10% could pay for better advertising, or help defray travel costs for speakers, or pay for Drupal buses, fund scholarships, pay for liability insurance, or help buy mugs and T-shirts.
If we controlled our own funds, we'd have options we don't have now. We could put our money into CDs between camps (or bonds or even mutual funds) and earn interest. We could take out a loan if that's useful. (Think, for example, about buying more professional video equipment.) Even if we don't need these options now, when we do need them it'll be too late.
There's also the question of liability: as it stands, any one of us could be held personally liable for our collective debts, or for any property damage or personal injuries. I'm not worried that this is a big risk, but still it's a risk. A corporation could indemnify us from that risk and could purchase insurance to cover liabilities.
The most important benefits may be the intangibles. There's value in the stability that comes from incorporation. There's a structure to support our goals and guarantee continuity from year to year. Incorporation tells the community we're serious. It gives sponsors and other partners a sense that we're reliable. Incorporation could maybe open doors for us that we haven't even thought about yet.
Thanks for leading this discussion
I'd like to thank Ben for initiating and contributing to this discussion, along with everyone else that has shared their thoughts.
I think it's been a very useful discussion and I look forward to ongoing conversations here, at Happy Hour, and at our Feb. coordination meeting.
I continue to lean in favor of taking some steps to better organize ourselves. I'm just not firmly committed to any one idea or plan, yet.
Tim Erickson
Triplo
Update on "Incorporation" Discussion
At the last Twin Cities Drupal Coordinating Committee meeting, we put discussion of incorporation on hold until our next meeting. With this in mind, I've included the issue of incorporation on our agenda for Thursdays meeting.
However, since our agenda is pretty full and we're trying to keep these meetings brief, I would encourage folks to think about this issue in advance of the meeting. If you have comments or questions, I'd encourage you to post them here in advance of the meeting. At the meeting, we'll have a little time for a few questions, clarifications, and very limited discussion.
As far as I can see, we can then take action on one of several options:
A) Agree that we should form a non-profit organization and proceed full steam ahead.
B) Abandon the idea (for the time being)
C) Middle ground - ask a group of individuals to proceed with the idea and put together a more detailed proposal on exactly what incorporation means and how we might structure it. Then vote(??) on this at some time in the near future.
Does anyone else have anything else to suggest?
Tim Erickson
Triplo
Option C + Offer of Facilitation...
Ahoy,
In my capacity as a cooperative developer and organizer, I would toss in a vote for Option C. I am relatively new to the Twin Cities and definitely new to this Drupal community (though I spent time in the one out in the Bay awhile back), so wouldn't want to comment on what the group should do (in terms of Option A or B). In going with Option C, I think it is pretty important to have someone with some distance to help facilitate the conversation -- to ensure the right critical questions get asked, as sometimes excitement and stars-in-the-eyes can keep groups from seeing all the obstacles and options.
To that end - I can offer up my facilitation services to folks, if you'd like. I spend a good portion of my work life helping folks figure out if (and, if so - what kind and how) they could go about creating a democratic enterprise to house and support the work they are or are trying to do. I typically work with folks who end up using either the non-profit or cooperative incorporation statute, and want to structure their governance and management in a democratic fashion. That sounds like what you folks might be doing, eh?!
So, take it or leave it, my feelings won't be hurt. If you wanted to set up a separate time to have a facilitated conversation, let me know and I would be pleased to do it for ya for no charge because I think the Drupal community is great! If you would want me to make a proposal to the group in person, I can swing that, let me know the details of when would be best.
In cooperation, EMLC
about.me/eamlc
EMLC
Cooperative Organizer
about.me/eamlc
Welcome and count me in
I love this idea and would welcome informed facilitation for this phase of our exploration. Having lived, worked and shopped in (other types of) coops, cooperative models are near and dear to me. TCDrupal has adopted many coop principles by default. I'm not well versed in official coop incorporation but feel this would be a great option to explore and might well unearth the right structure for us.
Welcome EMLC! Thanks for the input. I would happily participate in a process you would help facilitate.
So, I offer a friendly amendment to my previous proposal to have the proposed team explore not just nonprofit status but also coop (or other like) incorporation and report back to TCDrupal with options it recommends.
Barry Madore
Triplo
Minneapolis-St. Paul, MN
Let's do this thing
If one thing is true about this community it's that we get stuff done when we decide we want to get stuff done (no matter how crazy that stuff may be). The corollary is we can also put stuff on a back burner and leave it there until the pot cracks.
So, I say let's do this thing.
And by "this thing" I mean let's get a proposal on the table. I believe we have general consensus that we'd benefit from a more formal structure to help the community organize, make decisions and pull off activities like the camp. What we haven't yet agreed upon is the nature of the "formal structure" and the processes we'd adopt as an organization.
I'm of the opinion that incorporating as a nonprofit organization will provide a beneficial legal and organizational structure and give us the framework we need to then decide upon the processes we'd like to adopt. In other words, we'd get the legal benefits without unduly restricting us from deciding how we'll decide about stuff.
I'd like to see us pursue this. I'm voting for Tim's option C -- put together a team of folks interested in investigating both the technical and strategic aspects of becoming a nonprofit and make a proposal at a future TC Drupal meetup (like soon). The proposal will be either to go forward with becoming an np (with accompanying ideas about organizational structure options) or abandon the idea for x-y-z reasons (based on the priorities as expressed by the community).
I volunteer to be on this team and would like to offer my vote by proxy for this option (as I'll probably not make it to the meeting in person).
Barry Madore
Triplo
Minneapolis-St. Paul, MN
I (mostly) second Barry's input
While I don't have a strong opinion regarding what a more formal structure would / should look like, it does seem clear that the community would benefit from having one. And, while the discussion up to this point has been very good, it is a bit hard for someone like me who hasn't been a part of setting up a structure like the one being proposed to visualize all the pros & cons of the different ways of doing so.
I support "option C" as well - though I should be able to make the meeting itself, so I'll be casting my vote in person rather than by proxy... :)
C
I won't make it to the meeting tomorrow, but I have full faith and confidence in the wisdom of the TC Drupal community, and whatever decision it makes.
But here's my 2¢ anyway. Unless we go with B (and I understand why one might lean that way), then the next step would be for some volunteers to study the matter and bring a plan (or two) to the committee. As a proponent, of course, I volunteer. I'm willing to organize meetings, research legal issues, write up proposals for the AoI and bylaws, or whatever.
The only advice I'd try to give if I were there tomorrow is that a) we shouldn't let this interfere with planning the next DCTC, and b) we can take the time to do it right because there's really no deadline.
The group more or less
The group more or less decided on Option C unanimously, but the general feeling seemed to be that the financial relationship with the DA is quite valuable while we stand to gain other benefits from formal organization.
I also volunteer to be part of this committee. I think it would be good to meet in person as a group to discuss what we know starting out and where our focus should be going forward. Any suggestions for a date/time/location?
--
David Needham
Team Lead of Training at Datadog