MWStake incorporation

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This page documents the project for mwstake incorporation. Members of mwstake decided to incorporate with the two main goals being:

  1. Bank account for events (EMWCon, etc.)
  2. Accept grants from the WMF as a non-profit

Work that needs to be done includes:

  1. Follow instructions to process the grant (✔ Done)
  2. Work with lawyer to begin incorporation process
  3. Ensure the corporate bank account follows WMF rules which are similar to the rules for Rapid Grants
  4. Reporting on the outcome (what worked well, what didn't work well, and what you would do differently next time, etc.). Some sample reports are available.


History

The following are the major milestones to date:

  1. 02 August 2018 - Collected individual statements from MWStake members on what role they felt MWStake should have once incorporated
  2. 15 August 2018 - Rapid Grant Proposal was submitted
  3. 15 November 2018 - The rapid grant was approved and moved to funded

Non-profit type

It looks like after incorporation (C Corp), there is a choice between non-profit types, the two considered are 501(c)(3) & 501(c)(6).

501(c)(3)

A standard 501(c)(3) (technically called a public charity, it is what you think of when you think of a non profit) must receive a certain percent of its funds from the broad general public. A private foundation typically receives their funding from one source (or a few), invest it, and pay out the earnings. This is what many wealthy individuals set up. There might be certain requirements about needing to distribute a certain amount each year otherwise there is a 30% penalty. Donations from individuals would be tax deductible to a 501(c)(3). Key points:

  • Donations/Grants can be tax deductible
  • Types:
    1. Public Charity - Normally receives a substantial part of its income, directly or indirectly, from the general public or from the government. The public support must be fairly broad, not limited to a few individuals or families.
    2. Private Foundation - Receives most of its income from investments and endowments. This income is used to make grants to other organizations, rather than being disbursed directly for charitable activities.
    3. Private Operating Foundation - Considered hybrids, often maintain active programs similar to public charities, but may have attributes (such as close governance) similar to a foundation. Most of the earnings must go to the conduct of programs. Donation deductibility is similar to a public charity.
  • Notable 501(c)(3)s:
    1. Apache Software Foundation
    2. Electronic Frontier Foundation
    3. Mozilla Foundation
    4. Python Software Foundation
    5. Wikimedia Foundation
    6. Software Freedom Conservancy

501(c)(6)

A 501(c)(6), typically called business leagues or associations, are organized and operated primarily to promote the common business interests of its members. Income is usually from dues/membership but they can receive grants, however, any donations from individuals would not be tax deductible to that person. They would not qualify if its principal activities consist of securing benefits and performing particular services for members. 501(c)(6) organizations must rely on membership dues as a significant, though not necessarily primary, means of financial support.

  • Business League - Represents an association of persons having a common business interest, whose purpose is to promote the common business interest and whose activities improve business conditions rather than actually conduct the business itself. Members of the organization must be of the same trade, business, occupation, or profession in order to qualify.
  • Chamber of Commerce - Promote the common economic interests of all the commercial enterprises in a given trade or community.

Notable 501(c)(6)s:

Exceptions:

  • An association that promotes the common interests of certain hobbyists would not qualify because the Internal Revenue Service does not consider hobbies to be activities conducted as businesses.
  • An organization whose primary activity is advertising the products or services of its members does not qualify because the organization is performing a service for its members rather than promoting common interests. If an organization's primary activity is advertising the products or services of its members' industry as a whole, however, the organization will generally qualify if it also performs other services for its members.

Standard types:

  1. Chambers of commerce
    • Promote the economic interests of all businesses in a given area, such as Chicago or the Florida Panhandle.
  2. Trade associations
    • Form of business league
  3. Real estate boards
  4. Professional associations
    • Form of business league
  5. Pro football leagues
  6. Boards of trade
    • Promote the economic interests of all businesses in a given area, such as Chicago or the Florida Panhandle.
  7. Business leagues
    • An association of people with a shared business interest
    • The league must promote the common interests of its members, must not be engaged in business for profit and must not provide services to individuals the way a for-profit business does
    • A business league must represent an entire industry or the industry segment within a specific area. Representing just businesses associated with a specific brand doesn't qualify

Comparison

Similarities:

  • Both can hold conferences and speaking events.
  • Both can lobby, although at different levels, and both can be public advocates for issues that impact their communities.
  • Both are exempt from federal income tax, and sometimes state and local tax.

Differences:

  • Missions
    • 501(c)(3)s can have the widest range of possible missions including those focused on the arts, culture, humanities, education, the environment, health care, religion and the public sector.
    • 501(c)(6)s are focused on supporting overall industry needs, and may be involved with industries like telecommunications, food, professional and many more. They put on seminars, trade shows, write newsletters, journals, offer classes, and certification programs.
  • 501(c)(3)s have an advantage when it comes to raising funds from private foundations, which can give freely to public charities without having to do expenditure responsibility under U.S. Code §4945. Grants to any other 501(c) entity by a private foundation triggers these rules, reducing the likelihood the foundation would give to such entities.
  • Funding:
    • A 501(c)(3) is supported on contributions and grants, and can have other fee for service revenue or member revenue.
    • 501(c)(6)s are very dependent on member revenue for support as not being able to offer a tax deduction for gifts dramatically limits their ability to fundraise for contributions and grants.

References

501(c)(3):

501(c)(6):

501(c)(3) vs. 501(c)(6):

List of (c)(3)s & (c)(6)s:

Other

Board rolls and structure

The "normal" officer positions to accomplish the statutory functions of a corporation are president, treasurer, and secretary (one to be in charge and execute directions of the board, one to handle and account for the finances, and one to keep records). They can be called whatever one desires and the same person can conduct more that one function, although if there are enough people it is preferable to separate the duties. For a non-profit, there are also issues of accountability that strongly argue for separating the duties, so that no one person has too much power.

For the board itself, there are no positions, although most boards will elect a chairperson to run the meeting. Other than that, you are free to choose whatever structure works for you.

Links:

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