5 ms·

It seems to me like this is a shortcoming of the English (and American) legal system, where non-profit organizations and such can only be founded as "regular" c

by lutoma 5y ago

It seems to me like this is a shortcoming of the English (and American) legal system, where non-profit organizations and such can only be founded as "regular" companies and then tax-exempted. This means they are still subject to all the normal procedures surrounding companies like sales, and still tend to have one or a few owners who are solely in charge of everything. By comparison, many other European countries (Germany, France, Sweden, Belgium, …) have specific types of legal entities for associations that have appropriate restrictions on what can be done with them. For example, they can generally not be sold, are required to be internally democratic with fixed statutes, usually (but not always) have open membership and an elected board. I think that would go a long way to fixing these recurrent issues. https://en.wikipedia.org/wiki/Registered_association_(Germany) https://en.wikipedia.org/wiki/Registered_association_(German... https://en.wikipedia.org/wiki/Nonprofit_organization_laws_by_jurisdiction#France https://en.wikipedia.org/wiki/Nonprofit_organization_laws_by...

mjw1007 5y ago
It seems freenode did at one point have a charitable parent organisation, in the UK, but it had to dissolve because it was too expensive to run. https://web.archive.org/web/20130322063238/http://blog.freenode.net/2013/03/bye-bye-pdpc/ https://web.archive.org/web/20130322063238/http://blog.freen...
blibble 5y ago
you can write whatever restrictions you want to apply to the company into its founding articles of association/memorandum, which are the legal documents which state what the company is allowed to do and how it is to be operated however most of the off-the-shelf Articles tend to be completely unrestricted (for obvious reasons)
marcinzm 5y ago
>By comparison, many other European countries (Germany, France, Sweden, Belgium, …) have specific types of legal entities for associations that have appropriate restrictions on what can be done with them. For example, they can generally not be sold, are required to be internally democratic with fixed statutes, usually (but not always) have open membership and an elected board. I think that would go a long way to fixing these recurrent issues. As I understand it you can set all those things up in an American non-profit and many do in fact have that setup. So it's not a shortcoming of the legal system but of the people who created the entity. They chose not to do those things and no one objected strongly enough.
- lutoma 5y ago
  Fair, but one significant advantage of having a specific legal form is that the way the organization is set up is immediately apparent from the legal name. This also means that any non-profit that is not set up as such will automatically be subject to much more scrutiny. On other other hand, when I read "Signal Messenger LLC" or similar I have no way of easily knowing whether the organization is in fact set up in such a way.
- Stranger43 5y ago
  The main difference is the cost associated with it. In order to be an non-profit organization you need an founding meeting, board elections and all of it have to be notarized and drawn up by an attorney before being validated by the state an process that takes weeks if not months where as anyone can set up an company online in about 15 minutes. For some European nations the processes are far more similar and as code civil courts can do their own fact finding you don't need to pay an notary to validate everything or have an attorney draw up a whole bunch of documentation just to found an small non-profit association.
  - rswail 5y ago
    In Australia, setting up an association of members is as easy as a limited liability company. You can become a Federally registered not-for-profit as an incorporated association. The cost of having a model set of a constitution and doing the paperwork is as simple as doing the same for a limited liability private company.
  - jesboat 5y ago
    It varies from state to state, but in the states I'm aware of (at least 3) it's not nearly as hard as you're making it sound. An attorney is not required and, while the non-profit status may take some time to approve, the existence of the corporation itself generally is essentially the same as founding a for-profit corporation. In particular, attorneys are not required, and it is generally pretty easy to get things notarized for free (most banks have notaries on staff and I've never had one charge me.) I know multiple people who have set up non-profits on their own, without any lawyers, and have not had any difficulties throughout the process.
andrewaylett 5y ago
I think you may be looking for a CIO, or (in Scotland) a SCIO: https://en.wikipedia.org/wiki/Charitable_incorporated_organisation https://en.wikipedia.org/wiki/Charitable_incorporated_organi.... Do note, though, that it's insufficient to be a "non-profit" in order to become a "charity". Also, we have more than one type of limited company, and some are more amenable to community interest than others. A company limited by shares will likely have either concentrated or tradable ownership, while a company limited by guarantee is more likely to have a wider membership without so much economic interest. Going in the other direction, the charity I chair isn't a company at all -- we're an unincorporated association. Which isn't usually the best structure for a charity nowadays, but we make do with what we have.
- ValentineC 5y ago
  > Going in the other direction, the charity I chair isn't a company at all -- we're an unincorporated association. Which isn't usually the best structure for a charity nowadays, but we make do with what we have. Is there a reason your members aren't interested in incorporating? Protection from individual liability is huge.
  - andrewaylett 5y ago
    It's not that we're not interested, but -- as far as we're aware -- it's not as simple as incorporating our existing organisation and retaining charitable status.
russss 5y ago
> It seems to me like this is a shortcoming of the English (and American) legal system, where non-profit organizations and such can only be founded as "regular" companies and then tax-exempted. This means they are still subject to all the normal procedures surrounding companies like sales, and still tend to have one or a few owners who are solely in charge of everything. This isn't true in the UK. There's a structure called a Company Limited by Guarantee, which has no shareholders so it can't be sold. It's an association. These are quite common, and in fact Freenode Limited is one. It was never "sold" in any conventional sense. There is no owner of Freenode Limited, but Andrew Lee is currently the only voting member so he has full control.
- ValentineC 5y ago
  > This isn't true in the UK. There's a structure called a Company Limited by Guarantee, which has no shareholders so it can't be sold. It's an association. There's one more structure that's (so far) exclusive to the UK: the Charitable Incorporated Organisation [1]. It can be founded as either a foundation (trustees and voting members are the same) or association (usually a larger group of voting members). The key advantage of a CIO versus a CLG are the less onerous compliance requirements, which go a long way towards keeping smaller charities cheaper to run. [1] https://en.wikipedia.org/wiki/Charitable_incorporated_organisation https://en.wikipedia.org/wiki/Charitable_incorporated_organi...
  - russss 5y ago
    A CIO is more onerous than a CLG because a CIO is a charity, and comes with the charitable reporting requirements (and also the tax benefits). A pure CLG doesn't have the charitable tax benefits but it's still a non-profit governance structure, and you only have to file with Companies House and HMRC. The CLG is the lowest-hassle non-profit structure. (Confusingly, CLGs can also be charities - because charitable status can act as a "wrapper" around other corporate structures - and indeed a lot of charities are CLGs because the CIO is a more recent invention.) I wrote about this, ages ago, I think it's mostly still correct: https://russ.garrett.co.uk/2009/10/25/starting-a-non-profit-in-the-uk/ https://russ.garrett.co.uk/2009/10/25/starting-a-non-profit-...

by lutoma 5y ago

mjw1007 5y ago

It seems freenode did at one point have a charitable parent organisation, in the UK, but it had to dissolve because it was too expensive to run. https://web.archive.org/web/20130322063238/http://blog.freenode.net/2013/03/bye-bye-pdpc/ https://web.archive.org/web/20130322063238/http://blog.freen...

blibble 5y ago

you can write whatever restrictions you want to apply to the company into its founding articles of association/memorandum, which are the legal documents which state what the company is allowed to do and how it is to be operated however most of the off-the-shelf Articles tend to be completely unrestricted (for obvious reasons)

marcinzm 5y ago

>By comparison, many other European countries (Germany, France, Sweden, Belgium, …) have specific types of legal entities for associations that have appropriate restrictions on what can be done with them. For example, they can generally not be sold, are required to be internally democratic with fixed statutes, usually (but not always) have open membership and an elected board. I think that would go a long way to fixing these recurrent issues. As I understand it you can set all those things up in an American non-profit and many do in fact have that setup. So it's not a shortcoming of the legal system but of the people who created the entity. They chose not to do those things and no one objected strongly enough.

lutoma 5y ago
Fair, but one significant advantage of having a specific legal form is that the way the organization is set up is immediately apparent from the legal name. This also means that any non-profit that is not set up as such will automatically be subject to much more scrutiny. On other other hand, when I read "Signal Messenger LLC" or similar I have no way of easily knowing whether the organization is in fact set up in such a way.
Stranger43 5y ago
The main difference is the cost associated with it. In order to be an non-profit organization you need an founding meeting, board elections and all of it have to be notarized and drawn up by an attorney before being validated by the state an process that takes weeks if not months where as anyone can set up an company online in about 15 minutes. For some European nations the processes are far more similar and as code civil courts can do their own fact finding you don't need to pay an notary to validate everything or have an attorney draw up a whole bunch of documentation just to found an small non-profit association.
- rswail 5y ago
  In Australia, setting up an association of members is as easy as a limited liability company. You can become a Federally registered not-for-profit as an incorporated association. The cost of having a model set of a constitution and doing the paperwork is as simple as doing the same for a limited liability private company.
- jesboat 5y ago
  It varies from state to state, but in the states I'm aware of (at least 3) it's not nearly as hard as you're making it sound. An attorney is not required and, while the non-profit status may take some time to approve, the existence of the corporation itself generally is essentially the same as founding a for-profit corporation. In particular, attorneys are not required, and it is generally pretty easy to get things notarized for free (most banks have notaries on staff and I've never had one charge me.) I know multiple people who have set up non-profits on their own, without any lawyers, and have not had any difficulties throughout the process.

andrewaylett 5y ago

I think you may be looking for a CIO, or (in Scotland) a SCIO: https://en.wikipedia.org/wiki/Charitable_incorporated_organisation https://en.wikipedia.org/wiki/Charitable_incorporated_organi.... Do note, though, that it's insufficient to be a "non-profit" in order to become a "charity". Also, we have more than one type of limited company, and some are more amenable to community interest than others. A company limited by shares will likely have either concentrated or tradable ownership, while a company limited by guarantee is more likely to have a wider membership without so much economic interest. Going in the other direction, the charity I chair isn't a company at all -- we're an unincorporated association. Which isn't usually the best structure for a charity nowadays, but we make do with what we have.

ValentineC 5y ago
> Going in the other direction, the charity I chair isn't a company at all -- we're an unincorporated association. Which isn't usually the best structure for a charity nowadays, but we make do with what we have. Is there a reason your members aren't interested in incorporating? Protection from individual liability is huge.
- andrewaylett 5y ago
  It's not that we're not interested, but -- as far as we're aware -- it's not as simple as incorporating our existing organisation and retaining charitable status.

russss 5y ago

> It seems to me like this is a shortcoming of the English (and American) legal system, where non-profit organizations and such can only be founded as "regular" companies and then tax-exempted. This means they are still subject to all the normal procedures surrounding companies like sales, and still tend to have one or a few owners who are solely in charge of everything. This isn't true in the UK. There's a structure called a Company Limited by Guarantee, which has no shareholders so it can't be sold. It's an association. These are quite common, and in fact Freenode Limited is one. It was never "sold" in any conventional sense. There is no owner of Freenode Limited, but Andrew Lee is currently the only voting member so he has full control.

ValentineC 5y ago
> This isn't true in the UK. There's a structure called a Company Limited by Guarantee, which has no shareholders so it can't be sold. It's an association. There's one more structure that's (so far) exclusive to the UK: the Charitable Incorporated Organisation [1]. It can be founded as either a foundation (trustees and voting members are the same) or association (usually a larger group of voting members). The key advantage of a CIO versus a CLG are the less onerous compliance requirements, which go a long way towards keeping smaller charities cheaper to run. [1] https://en.wikipedia.org/wiki/Charitable_incorporated_organisation https://en.wikipedia.org/wiki/Charitable_incorporated_organi...
- russss 5y ago
  A CIO is more onerous than a CLG because a CIO is a charity, and comes with the charitable reporting requirements (and also the tax benefits). A pure CLG doesn't have the charitable tax benefits but it's still a non-profit governance structure, and you only have to file with Companies House and HMRC. The CLG is the lowest-hassle non-profit structure. (Confusingly, CLGs can also be charities - because charitable status can act as a "wrapper" around other corporate structures - and indeed a lot of charities are CLGs because the CIO is a more recent invention.) I wrote about this, ages ago, I think it's mostly still correct: https://russ.garrett.co.uk/2009/10/25/starting-a-non-profit-in-the-uk/ https://russ.garrett.co.uk/2009/10/25/starting-a-non-profit-...