Loomio
Thu 25 Jun 2015 7:13AM

A new legal framework for OuiShare

FB Flore Berlingen Public Seen by 337

Dear all,

This is to be discussed during the Summit, but since it is a bit technical, I would like to raise the topic here first :)

As you may now, OuiShare is a French registered Non-Profit (Association loi 1901), and currently has 2 sectors :
- one commercial (for activities that rely on sponsoring and ticketing revenues) => for this one we pay VAT and other taxes based on profits
- one non-commercial (for all the rest, especially community activities and projects like POC21 or OuiKit, that get public funding) => for this one we do not pay any taxes.

The condition for having 2 sectors is that the non-commercial sector should remain the main thing.
This can not work anymore, because we simply raise too much money through our commercial activities.
Also, this situation does not allow us to provide tax-deduction receipts for individuals as well as businesses (mécénat).

==> our proposal is to change that in 2016. But we need to anticipate of course :)

What we suggest is:

  • Creating a commercial entity, distinct from OuiShare Non-Profit, that would carry the Fest, and other sponsored/paying events. The brand would be used by this commercial entity through a license.

  • Keeping in OuiShare only the activities that are considered as "non-profit" and thus, can lead to tax-deduction receipts etc. --> and shift the global partnerships (Maif, SNCF) from sponsoring (what they currently are, fiscally speaking) to mécénat (tax-deductible patronage).

If we all agree on this scheme, we will need to answer 2 other questions:
1) What would the commercial entity be like? (who runs it? Who owns it? business or non-profit status? etc...)

2) What would be the relationship between the commercial entity (+ the potential others, such as the consulting arm cf. other loomio discussion) and the OuiShare Non-Profit entity?

Please share your thoughts :))

Flore, Julie, Francesca, Benjamin, Antonin, Edwin

AC

Albert Cañigueral Thu 25 Jun 2015 7:20AM

In Spain we have a non-profit and I don't think we have the same type of limitations at the moment. In any case I would say that the ideal is to have local non-profits + 1 global (EU wide at least) commercial activities branch.

Having local structures is needed in order to be eligible for some stuff (public administration related mainly) yet it is a pain in the ass to keep it and to be up to date with taxes, etc.

M

Maud Tue 30 Jun 2015 9:32AM

Hello all, I guess we need to go back on this conversation as we couldn't go further on it during the summit. Did you already work on the different possible scenario or do we need to elaborate them together? Personaly I think the commercial entity should still reflect OuiShare Values, so I would rather go to something non-profit as far as I'm concerned.

FB

Poll Created Wed 1 Jul 2015 10:57AM

Take out all commercial activities (incl. Fest) from OuiShare Non-Profit in 2016 Closed Wed 8 Jul 2015 9:07PM

In order to be able to provide tax-deduction receipts for donations (either from individuals or businesses, such as the Global Partners), we propose to take out all the so-called "Commercial activities" (including all events that get sponsoring or ticketing money) from the OuiShare Non-Profit.

Important: the main implication of this decision is delegating the organization (or at least the production) of the Fest to another entity (either an existing or new business or non-profit).

Results

Results Option % of points Voters
Agree 100.0% 18 MB ADG JK BT EG DW AG AK SC AC SR KB MB M JI MAG JL AL
Abstain 0.0% 0  
Disagree 0.0% 0  
Block 0.0% 0  
Undecided 0% 62 DDB JS BJM AJ B JL PR A MT LH ASB JM DL CG TD CR LT FB P

18 of 80 people have voted (22%)

BT

Benjamin Tincq
Agree
Thu 2 Jul 2015 5:48AM

I think it's the only possible way to move forward in order to be able to provide tax deductions again. We can decide what is the structure of the event company managing the Fest in a second time / another Loomio discussion

M

Maud
Agree
Thu 2 Jul 2015 7:51AM

Ok with splitting the activities and having the discussion of the kind of commercial structure (and the question of its ownership, governance etc.) in a different loomio post

DU

[deactivated account]
Agree
Thu 2 Jul 2015 8:21AM

The other way round would be fiscally, economically and ethically unsustainable in the long run.

EM

Edwin Mootoosamy
Agree
Thu 2 Jul 2015 8:38AM

I really think this move is necessary in order to allow OuiShare to continue to develop our activities. I agree with Benjamin's proposition to discuss about the structure / the relationship with OuiShare in another Loomio.

AC

Albert Cañigueral
Agree
Fri 3 Jul 2015 2:34PM

Ideally also check if the same issues apply to non-french orgs (Spain, Germany, Italy, etc.)

SC

Simone Cicero
Agree
Sat 4 Jul 2015 2:00PM

I explained in a comment.
=)

MB

Myriam Bouré
Agree
Tue 7 Jul 2015 9:57AM

Thank you Flore :-) I understand that this option has been investigated, so I guess taking out the commercial activities is the only thing to do. Then of course we will have to discuss the form of incorporation and by-laws of the new entity.

SR

Samuel Roumeau
Agree
Tue 7 Jul 2015 10:08AM

I'm not an expert on this part. I've read the thread & various explanations and I trust you guys.

JK

Josef Kreitmayer
Agree
Tue 7 Jul 2015 2:38PM

As I follow the conversation, in relation especially to the first 2 posts of Benjamin, I see the general need for a commercial entity to reduce risk of tax back pay in risks of 10.000s €. Ouishares tax advisor should be considered before deployment.

ADG

Arthur de Grave
Agree
Tue 7 Jul 2015 9:36PM

I think it is essential that we take the leap: we are currently at risk. Also, remember that the difference between a "société" and an "asso" in France is not the same as the one between for-profit/non-profit.

AK

Auli Kütt
Agree
Wed 8 Jul 2015 6:34PM

Mozilla is also divided into Foundation and Corp, while the latter is 100% owned by and responsible to the non-profit. Wouldn't a similar solution be feasible in France?
See https://en.wikipedia.org/wiki/Mozilla_Corporation

JK

Josef Kreitmayer Wed 1 Jul 2015 1:13PM

I know the construct of a 100% owned commercial entity to the non-profit entity, for exact the reasons you mentioned.

So, if the decision is in full consent with core connectors, I would apprechiate it.

JK

Josef Kreitmayer Wed 1 Jul 2015 1:56PM

I am actually not so sure about the Fest, as that would raise consumer prices for the 20% (probably different taxation for education or tickets), if it was tax-deducted so far.

In my opinion that is a case for a tax advisor that is knowledgeable with NPOs. Probably that consultation is done already.

BT

Benjamin Tincq Thu 2 Jul 2015 5:51AM

@josefkreitmayer not really because the Fest was not tax-deducted, precisely because selling tickets and getting sponsors are considered commercial activities anyway. So the only way to organize OuiShare Fest as it is, without compromising the tax-deductible non-profit status, is to take the event production out of the non-profit.

And just to clarify: the organization to which we would delegate its organization, would be run by a specific team of connectors, but cannot be owned by the non-profit (to be clarified)

I would personally advocate for kickstarting a new project in the OuiShare ecosystem which would be an event production company specialized in the organization of collaborative / open source events (it could be a co-op, or a social enterprise, or even a commercial non-profit though I don't think it fits the nature of the activity). This organization would have for first project OuiShare Fest (nothing set in stone and we could change that anytime) as well as other customers, the kind of which are asking us to help them design or organize events nowadays (we see some of these requests already)

Its relationship with OuiShare could be of three kinds :

a) OuiShare and this organization are co-producers of the Fest

b) OuiShare delegates to this organization, the organization of OuiShare Fest (as a supplier)

c) OuiShare licenses the OuiShare Fest brand to this organization

F

Francesca Fri 3 Jul 2015 2:38PM

@albertcanigueral yes, it does, definitely in Germany cc @davidwe . This is why it's super important to take this into account in organizing events like the Fest in other countries if you have a non profit structure. Ideally the way I see it, we should have 1) non-profit structures in all of OuiShare's most active countries, to be able to get subsidies and grants 2) 1 commercial structure, to group all European commercial activities like event organization.

MB

Myriam Bouré Fri 3 Jul 2015 5:10PM

I found from this document https://www.inextenso.fr/Documents/Marches/Associations/dossier-regime-fiscal-associations.pdf that says: "if the commercial activities are not preponderant but the resources they bring in go over 60 K€ annually: given that we count seperately the commercial activities and the non-commercial (sectorisation), the association is subject to taxes for the lucrative activities, and on patrimony tax and employees tax for the non-commercial activity. Without sectorisation, all activities are taxable."
Even though I can understand the interest of having other commercial entities to organize events for third parties, I'm not sure the OuiShare Fest should be treated like that. An interesting exercise would be to "count" the volunteer work done by the community and value it in the account of OuiShare. Because I am not sure the commercial activities are really preponderant... If we take all the community building activities done all over the world, all the free events organized everywhere by OuiShare members, all the volunteer time spent on projects, the volunteer work in the OuiShare Fest... I think the Fest commercial activity is not preponderant, event if it goes beyond the 60 K€ threshold. Then maybe sectorisation is a solution?

I'm afraid it makes our mission less clear if we seperate the Fest from the other activities. Seperating the activities we do for third parties is important, like consulting, and if we organize events for other insitutions. We develop expertises through what we do in the non-profit, and we sell those expertises through commercial entities we create as a side. But the events we do in our own name, and to serve our social purpose, I'm not sure we need to take them out if we value all the other contributions. Which I don't think it is too complicated to do (every connector could evaluate its time contribution).

Then there is the question of "sponsorship" vs "mecenat". If the amount which is given by global sponsors are invested to finance the non-profit activities (pay for the OuiShare employees who work to support the whole community for example) then I think it can be considered as mecenat. So here again, maybe the work is to distinguished money given only for the fest, with an "image benefit", and money which is given more generally to support OuiShare activities. MAIF could maybe make two donations: one as a sponsor for the Fest, and one as a "mécène" to support OuiShare community activities, and for that they shouldn't expect any counterpart. Having two separate entities will not solve the problem of a global partner that gives money and want some trainings/consulting in return (this wil still be sponsorship).
If you have a contact with a legal advisor, the question to ask would be: can a company be at the same time a sponsor and a mécène?

I am not opposed to the fact to seperate the Fest from the non-profit, but when investigating more on that, I feel that maybe we have not investigated this option of valuing the volunteer work, and that the commercial activities may not be so important... But maybe I'm wrong:-)

BT

Benjamin Tincq Fri 3 Jul 2015 6:20PM

@myriamboure actually we have been considering these options :-) as Flore reminds in the introduction of this post, we have had two sector (one commercial and one non-commercial) for the past two years already. In 2014, the part of the commercial sector was around 75% of the total budget ... and in 2015, we might be closer to 50-60% commercial but only thanks to POC21 which brings 700K€ of non-commercial activity in the balance ... we had thought of issuing tax receipts for "mecenat" on the project, counting on the fact that we would value volunteer work to try putting the ratio even more in favor of the non-commercial, but the risk of "redressement fiscal" was really too high. Plus, we won't have a POC21 every year ;)

The core of the problem is that the Fest in its entirety is considered by the tax administration to be a commercial activity, because of ticket sales (way over 60K already), sponsors, and the fact that the nature of the activity (a conference on innovation / collab eco) could be considered to "compete" on the market of professional events.

So that's why putting the production of OuiShare Fest in another structure makes the most sense to make the best of both worlds :) (non-profit & conference organization). Which does not mean we would "lose" it: it's still OuiShare Fest and belongs to OuiShare. Only its execution would be delegated to a third party (which would actually be a team of connectors)

MB

Myriam Bouré Fri 3 Jul 2015 9:13PM

Thank you @benjamintincq for those explanations :-) I just have difficulties to "visualize" the volunteer contributions of the whole global community. Have you (I mean people from OuiShare ;-)) done any work on that you could point me to? In the drive for example (I don't yet have access to it)? Just to understand... because I made a roughly calculation, with 70 connectors working 20 hours per month for free for OuiShare, and a cost per hour of about 50€ (base of a net income 4000€ for executive positions) it makes 840 K€ :-)
I found an interesting document on that btw: http://www.associations.gouv.fr/IMG/pdf/benevolat_valorisation_comptable_2011.pdf

Anyway, if you have studied that option and it doesn't solve the problem, I guess taking the commercial activities out is the only option... and in that case there needs to be a discussion on which form of incorporation.

SC

Simone Cicero Sat 4 Jul 2015 1:59PM

All this challenges are super important for us to grow :)
Creating a commercial entity from scratch also gives us the possibility to discuss peacefully on the ownership structure and execution of this entity. I look forward to have a further discussion on this. Overall: I see an opportunity if there's enough interest from the connectors group to create an enterprise that has the mission to nurture collaboration and discussion through events and gatherings.

Given the quality of the involved team, with such a player I'ld be willing to:
- Work on
- Advise / Invest In

And I think others would. Therefore the distribution of this company equity is a very interesting opportunity and should be as open as possible for the community. Then, we need to think on how and if this company should re-distribute dividends or maybe redistribute surplus leaning towards a B-Corp / SocEnt reinvesting in sustainable developments and mission related activities.

This company may or not be strongly linked with ouishare in terms of brand - subject to discussion - but I still need to form an idea on what should the agreement re the Fest (which is crucial).

I also think that there are a lot of other contexts in which this company can provide value / have opportunities (eg: Q12016 Business event in Milan, The fair in Germany, new formats for realtime strategy-making, learning experiences, retreats, etc...). Agree with Francesca that this could be global.

Maybe this could be the MVP of an "ecosystem" of brands that want to be part of an "assembly"???

FB

Flore Berlingen Mon 6 Jul 2015 7:23AM

@myriamboure yes, we looked into this option with the assistance of the expert comptable who checks our accounts.
That's what we wanted to do this year, so that POC21 can provide tax deduction receipts for big partners. But the conclusion of this inquiry was that there was still a pretty high risk, which would be a burden not only for us, but also for people in charge in the future (for at least 3 years). One option was to make a provision of 20% for each and every tax deduction receipt that we provide. This does not seem reasonable at a large scale, and POC21 team decided not to go into it.
Also, you would never value volunteer work based on a net income of 4000 euros :) Calculations are usually made upon the SMIC or medium wage.

I hope this answers your questions, but please ask if it is not clear ! :)

B

Bezdomny Tue 7 Jul 2015 5:17AM

I am not familiar with French non-profit law, it would be great to have a lawyer in this conversation, to clarify the questions that @myriamboure is raising, would it be possible to hire one?

Also, I am wondering how the Fest will happen? Will the commercial entity "hire" connectors to work on the fest? Will the fest production be based on volunteers? If so, how is that commercial? Can the fest exist with just the core group that is working in that sector or will they have to outsource help from the non-profit sector, and (sorry for redundancy) will that work be paid?

AC

Albert Cañigueral Tue 7 Jul 2015 6:17AM

BTW as non profit we can apply for free legal advice from http://thomsonreuters.com/en/products-services/legal.html ( http://thomsonreuters.com/en/products-services/legal.html )

daniel.rostrup@thomsonreuters.com ( daniel.rostrup@thomsonreuters.com ) was the contact a while ago. It was not too complicated to apply yet we never completed the process

FB

Flore Berlingen Tue 7 Jul 2015 7:54AM

@bezdomny we have talked with many experienced people.. we could hire a lawyer for sure, but I bet they will give the same answer, and we will have spent 5K and another 2 months in the process. At some point we (not the lawyer) need to make choices, because risk zero does not exist.

What exactly would you need to know to feel more confident with the decision ? I can provide more information about the FR non-profit law if needed....

BT

Benjamin Tincq Tue 7 Jul 2015 8:21AM

Yeah @bezdomny as @floreberlingen explains, this is the kind of discussion we've been we've having in the OuiShare (France) team for the last three years, during which we had plenty of time to ask advice from many people, including lawyers who have been advisors of OuiShare since the very begining (ex: Anne-Laure Brun Buisson). This specific part, about taking all "commercial" activities in general, and the Fest in particular, is actually pretty simple, there is no "legal rocket science" or real technical question here ;) it's more a choice to optimize the fiscality of our activities.

The part where I think that we would need a lawyer though, would be the actual design of this new organization: should it be a non-profit or a company ; if it's the company what is its ownership (and can OuiShare own part of it) ; is it a supplier, or a co-producer / partner, or does it use the OuiShare Fest license ; how is OuiShare formally involved in the governance of the structure ... etc. But at this moment we're just validating the idea of setting up this new structure, before entering the real work.

And regarding the volunteers part, three things:

  • the Fest production is ALREADY considered commercial, and we pay taxes on its organization ; this does not prevent us from having volunteers in any way. The decision is just about moving that production to another structure.

  • then even though we need to find the right details with a lawyer (see above) OuiShare would still the organizer of OuiShare Fest. Only its production would be delegated to a third party (the new structure)

  • even if we find out with the lawyer that the third party structure needs to be the legal organizer of OuiShare Fest, it can still be a (commercial) non-profit, like OuiShare is today. and I think even if it was a company, there would not be any problems in having volunteers (cf. music festivals for instance) but I'm not 100% sure so this would have to be checked

AK

Auli Kütt Wed 8 Jul 2015 6:35PM

Mozilla case with a working link :) >> https://en.wikipedia.org/wiki/Mozilla_Corporation

F

Francesca Wed 8 Jul 2015 9:19PM

If you read above carefully, the Mozilla option is not a possibility (in France at least), IF we want the non-profit structure, which owns the for-profit, to give tax deductions. Any commercial activities linked to the non-profit structure would comprise the non-commercial entity from doing this.

But so now that step 1, creating a new structure to manage the Fest, is agreed upon, we can start discussing the exact options for what type of structure and how it is linked to the non-profit.

Francesca

Sent from mobile

F

Francesca Tue 20 Oct 2015 7:42AM

As per the decision above, we decided a few months ago to take all commercial activities out of the French OuiShare Non-Profit structure -- to become a non-profit serving only the public good -- to be able to start giving tax deductions from to companies and therefore getting access to other funding sources or higher funding amounts.

Consequently, all commercial activities that will occur around OuiShare Fest 2016, such as sponsors and ticket sales, must be transacted through a new legal entity.

I have done a lot of thinking over the past weeks about what type of structure we should create and have come to the following conclusion on what will best fit our imminent needs:

Create a new non-profit structure that is a commercial non-profit (which is what OuiShare has been till now), which serves solely as a vehicle for ticketing and collecting sponsorship money for all our events, also internationally, if useful. This structure would not own OuiShare Fest or use the OuiShare brand, but will simply be a service provider that takes care of part of the event production.

We still need to figure out the details of the cash flows between our existing and this new entity, but Julie could manage both of them as tresurer of the new structure, with me as "président" -- the aim being that no money stays in this structure but we basically spend all money that comes in on event production costs. The structure could be called "Collaborative Event Production" for instance, but this name would not appear anywhere other than on invoices.

Why I suggest this option:

  • if it is an "Association" (non-profit in French), there is no question regarding the ownership of this new structure, since non-profits have no owners *creating an Asso is the easiest, fastest and cheapest type of structure you can create from an administrative perspective (much easier than a company)
  • we do not have a lot of time because we need to open ticket sales for the Fest in a few weeks latest, and I do not want to rush a decision on creating a company (which implies other larger questions).

I would not rule out that maybe in the long term we decide it may make sense to create a company for these commercial activities, but since for now we need something that functionally fullfills our needs, I think an Asso is the best choice. THIS IS NO LONG TERM COMMITMENT: Nothing stops us from trying something different after the next edition, if we don't think it is optimal afterall.

To sum up, this new entity solves our functional problem that we need to take all commercial activties out of OuiShare ASAP, without us needing to create a new brand or company to invest in. Therefore it also does not have any impact on governance or how the Fest team is organized.

Please let me know if you have any clarification questions! Due to the reasons mentioned above, I will move forward in creating this structure in the coming days, unless anyone has major concerns with this option.

DDB

David De Belleville Thu 22 Oct 2015 3:21PM

if the 2 entities routinely work together (for example as event co-producers or if one outsources to the other), there is a risk the fiscal administration might requalify the non-commercial nature of the existing Ouishare. For that reason, it's better to have different declared administrators (Fran & Julie are clearly involved in the management of the existing structure). My take is that activities should be as separate as possible (separate income, separate projects), which I suppose is the objective of the current plan. I believe very few activities will qualify for allowing tax-deduction (research, education). Good luck with setting this up nicely :)

AB

Alexandre Bigot-Verdier Fri 29 Jan 2016 2:51PM

Hi everyone,

Speaking about legal framework. As OuiShare MTL needs a bank account for the projects of 2016, we might create a legal structure.
It will surely be a non-profit, even if we are still looking to th format of a "coop" wich seems too heavy to administrate...

F

Francesca Fri 29 Jan 2016 5:31PM

Good to hear @alexmtl ! Actually, for your information, we had a call last week with Germany (@davidwe) and the UK (@elenagiroli @elenadenaro ) about how they are currently in the process of creating their legal structures. It is not super organized, but here are our notes, which may be helpful: https://docs.google.com/document/d/11dCrUk9P31A1AaNkinHRWauqHmtM-xBre3CoJpI4h38/edit !

Please keep us posted on how / when your move forward :)