adopt a cooperative operating agreement

[chadwhitacre]

It's time. Gittip right now is an LLC that is wholly owned by me. Gittip is de facto owned by the subset of our users that think of themselves as owning Gittip. We need to make this real de jure. I think we should be able to do this by writing bylaws an operating agreement for the current LLC.

[seanlinsley]

I definitely agree this is needed. Are there examples we can base ours off of?

[chadwhitacre]

I believe @GuruZilla @phoemke was going to maybe look into this?

[chadwhitacre]

(Have asked on Twitter for a GitHub nick.)

[balupton]

Is owners the right word here, I would have thought evangelists would be more appropriate. As while they have access to the IP, they don't own it.

confabulators is a confusing term, let's not invent terms.

In Bevry land, we have;

• users, people who use our stuff
• contributors, people who participate in our issues
• extras team, people who have push/pull access to our plugins
• core team, people who have push/pull access to our core projects
• leadership team, people who have owner access
• me, the guy on the LLC

For gittip:

• users
• contributors
• evangelists
• staff

seem appropriate

[chadwhitacre]

Confabulators isn't part of the bylaws. I wanted to avoid contributors because when I've used that term for Gittip people have thought it refers to people contributing money on Gittip. I also considered collaborators but that has a specific meaning w/in GitHub. Not everyone who participates in conversations is officially a contributor collaborator in GitHub parlance. I also considered participants but that's what we call people with a Gittip account in our database. But yeah, confabulators isn't in the bylaws so let's discuss that elsewhere if necessary.

[chadwhitacre]

I actually want multiple people to own the LLC. In the past I've organized a cooperative as an LLC with cooperative bylaws.

[seanlinsley]

I wanted to avoid contributors because when I've used that term for Gittip people have thought it refers to people contributing money on Gittip

In my opinion contributors is the clearest word available to describe people who participate in Gittip's development. If it's confused with those funding Gittip, maybe we should describe those people as backers or donators or patrons.

[paulfitz]

Not sure if this will be useful to you, but here are the bylaws of our random consumer/shared-services co-op: http://member.datacommons.coop/bylaws. You end up with member-owners who use the co-op's services and elect a board that directs the co-op, and (optionally) patrons who use the services of the co-op without being members. There are professional co-op developers out there who are very helpful at organizing co-op conversions (disclaimer: I'm married to one of them). I wonder also if people like AORTA http://www.aorta.coop/ might also be able to help with the overall situation.

[phoemke]

Ping! (Hi, Chad!)

The nutshell at the tip of the iceberg is that as a PA LLC, the Operating Agreement is the definition of the entity. Changing it (by whatever means are currently defined in the agreement) would change the rules of how Gittip is defined.

In our case, we'd want to create definitions of owners that fit our own understanding of "We the Gittip". How that relates to contributors, participants, and others is going to be complex. (Building a generous community that is safe from griefers is a delicate matter.)

(I have a few links for resources, but not sure how to compile and summarize those usefully yet, so I'll save them and keep researching.)

[chadwhitacre]

(FTR, I've switched from confabulator to contributor in 7f05b9b.)

[chadwhitacre]

Scott Bader was founded in 1921 and conventionally managed for 30 years. However Ernest Bader, the founder, was never comfortable with a capitalist governance structure. Having become Quakers, Ernest and his family believed that ethical and moral action to improve this world was vital. For many years they sought a 'third way' of distributing the capital of the company in a less divisive manner and a method by which all employees could have a 'real' say in the company. They believed that labour should employ capital, acknowledging the equality of everyone as individuals and that only a restructure of the way industry was managed would bring this about.

In 1951 a radical decision was made resulting in the creation of The Scott Bader Commonwealth, which was founded on Quaker Principles.

http://www.scottbader.com/about-us/11/our-history

The people that work at Scott Bader can become Members of The Commonwealth and as such become trustees-in-common of the company assets. Each generation must ensure the ongoing success of the organisation so that future generations can benefit from its continued existence.

http://www.scottbader.com/about-us/45/our-governance-structure

(h/t)

[chadwhitacre]

https://github.com/colab-coop/bylaws/

[chadwhitacre]

http://www.co-oplaw.org/topics-2/cooperative-bylaws/

[chadwhitacre]

Alright, let's start pushing on this a little bit.

[H]ere are the bylaws of our random consumer/shared-services co-op: http://member.datacommons.coop/bylaws.

Thanks, @paulfitz! :-)

You end up with member-owners who use the co-op's services and elect a board that directs the co-op, and (optionally) patrons who use the services of the co-op without being members.

Yes, that's the general direction we want to go.

There are professional co-op developers out there who are very helpful at organizing co-op conversions (disclaimer: I'm married to one of them).

We may in fact be interested in talking to the person you're married to. :-) Could you provide contact info here, or privately to [email protected]?

I also have a card in front of me for a Pittsburgh lawyer with expertise in worker-owned co-ops, planning to call next week.

I wonder also if people like AORTA http://www.aorta.coop/ might also be able to help with the overall situation.

Heh, I recognize Esteban Kelley from the Platform Cooperativism conference last week (#384). :-)

[chadwhitacre]

The nutshell at the tip of the iceberg is that as a PA LLC, the Operating Agreement is the definition of the entity. Changing it (by whatever means are currently defined in the agreement) would change the rules of how Gittip is defined.

@phoemke Right, okay, so ... bylaws for a corporation, and an operating agreement for an LLC, ya? Gratipay, LLC was formed in 2002, and if we ever had an operating agreement, it's now lost to the sands of time. Let's keep this as a question for the lawyer (once we hire one), what dance we'll need to do to adopt a new operating agreement, given our current situation.

[chadwhitacre]

I believe next steps here are to start with Data Commons' bylaws, which seem as good as any, and start drafting our own operating agreement. I think we should produce a draft ourselves, and then take it to a lawyer for additional revision. That should save us some money.

[chadwhitacre]

We want, eventually, millions of members. Right? Is the upcoming Gratipay retreat (#393) going to be our constitutional convention? Our first annual meeting, where we ratify the new operating agreement? O.O

[chadwhitacre]

I have to say, I really love the Amish way of choosing leadership: they vote their way to a shortlist of four or so, and then draw straws. I don't know if it's actually drawing straws, but it's random, is the point. I would love to incorporate that into Gratipay's operating agreement. :)

[nobodxbodon]

I wonder what it means if becoming a co-op:
Internally, what procedures will be different from now? And externally, what changes will be made to the user terms?

[nobodxbodon]

Besides, I sincerely hope our limited resources can be focused on the project, especially if we put it in roadmap publicly, unless a structural change is absolutely necessary before that project is launched.

[Changaco]

There's a sense in which forkability is the ultimate democratic ownership, as @Changaco has, I think, amply demonstrated. 😁

I don't think that forkability can be likened to ownership, it's more a lack of monopoly on the code. While forkability allowed me to create Liberapay "quickly" (it still took me 8 months), democratic ownership would have allowed every Gratipay member to vote with equal power on the choices that had to be made, which may or may not have resulted in different decisions than the ones that were taken.

Liberapay isn't a co-op, but it has co-directors (currently 4 of them) who each have one vote on every decision taken by its nonprofit organization (that includes any use of donations received by the org, changes to the terms of service, etc).

[chadwhitacre]

democratic ownership would have allowed every Gratipay member to vote with equal power on the choices that had to be made

That depends on the details of the democracy. Which decisions are constitutional and which are operational? Let's say everything went down exactly as it did, with the exception that yinz had voted me in as CEO or president or director or whatever. That would've counted for a democratic workplace under cooperative principles, even though we didn't hold a formal vote on the particular decision to start banning people (a decision I discussed at length with a number of people, particularly at the retreat that year as well as with you and others on https://github.com/gratipay/violations/issues/1).

What's more, you mentioned in person that you probably would've forked even if we had voted and the vote led us in the same direction we in fact took. The bottom line is that the situation we found ourselves in was a conflict-ridden mess, and it's not clear that a fine-grained democratic constitution such as Liberapay's would've performed any better (and for what definition of "performed better"?) given the circumstances. Gratipay's forkability, on the other hand, at least allowed you to retain some measure of autonomy.

It was interesting to discover the following in Ours to Hack and to Own a couple days ago, in Mayo Fuster Morell's description of platform provision as one of "six interrelated factors as determinants and drivers of commons governance" (214):

For participants, autonomy is linked to the license held for the commons-pool resources and the type of software used for the platform (i.e., copyleft licenses and the use of freely available code, as in FLOSS, versus conditions defined by ordinary copyright). If the platform can be replicated—if it is "forkable"—the relationships created on forked versions are free from the original platform provider. FLOSS and copyleft licensing allow platforms to be replicated, while close copyright license regimes prohibit that. In other words, the use of FLOSS and a copyleft license creates conditions in which the community can have greater autonomy and freedom from the platform provider.

Though she immediately goes on to say:

Governance very much depends on who is in control of these six power nodes in commons production. Each of the axes of governance can be managed in an inclusive or exclusive way. They may encourage involvement on the basis of participants as individuals or through the community as a whole.

(Miriam Cherry's chapter, the next one, is even more highly relevant to our situation.)

[chadwhitacre]

unless a structural change is absolutely necessary before that project is launched.

It's not absolutely necessary, of course. But I think a more formal identification with the cooperative movement could solidify our identity for ourselves, and also help to distinguish us from our VC-backed, for-profit competitors (BountySource at one time; now OpenCollective).

I think the proposal I'm arriving at here is that we:

• adopt the cooperative principles into our values
• apply for a .coop domain with no further changes
• let the cooperative identity guide the future evolution of our constitutional structure

In other words, we may be closer than we think to being able to close this ticket! 😱

[Changaco]

The bottom line is that the situation we found ourselves in was a conflict-ridden mess, and it's not clear that a fine-grained democratic constitution such as Liberapay's would've performed any better (and for what definition of "performed"?) given the circumstances.

Of course we'll never know for sure whether formal rules similar to Liberapay's would have produced a better outcome or not, but I think they might have helped us reach a compromise.

Gratipay's forkability, on the other hand, at least allowed you to retain some measure of autonomy.

I'm not denying that, I merely said that forkability isn't "the ultimate democratic ownership".

[chadwhitacre]

we'll never know

Indeed! Such tantalizing what-ifs! :-)

I merely said that forkability isn't "the ultimate democratic ownership".

Sure, not in the sense of "ultimate" as best or most thorough or highly developed or something like that. I was thinking of "forkability as an accountability measure." Forkability provides a worst-case scenario that is more democratic (preserving of individual autonomy; non-monopolistic) than the worst-case scenario in a situation lacking forkability. The proper constitution for the best of times is another matter.

[chadwhitacre]

Forkability raises the lower bound on democracy, in other words.

[chadwhitacre]

(Miriam Cherry's chapter, the next one, is even more highly relevant to our situation.)

Here is her conclusion (pp. 226-227):

Regardless of the choice of business entity, another important issue is designing a workable governance structure in the operating agreement or corporate documents. […]

The fact that there are no tailor-made enabling statutes geared specifically toward platform cooperatives contributes to increased setup costs and barriers to entry. But many businesses that do not fit the traditional mold have had to confront this issue before. […]

Given the turnover and flexibility of online platform work, the operating documents should be written to allow for relative ease of entry and exit as a member. In addition, the organizing documents must also set up the relationship in a way that sets out what the expectations are for the members, clearly and succinctly. The documents need to include provisions for reducing the share of profits if an individual member is shirking, and also contain clear provisions defining under what circumstances a member or shareholder may be disassociated. In terms of the global or international scope of many platforms, the operating agreement and other documents can be written to provide for choice of law and choice of jurisdiction. Current statutes allow for electronic or remote voting for boards of directors or members, so long as such procedures are set out in the corporate charter or operating agreement. Note that running a business is riskier for the individual worker in a platform cooperative—like any business, the LLC members or B Corporation shareholders run the risk that there will be no profits.

Perhaps the answer to the misclassification lawsuits and the struggle over employee status is to work around it, regardless of the outcome. While not the perfect solution, already-existing legal structures can be modified to accommodate platform cooperatives.

[chadwhitacre]

I've kicked off a project to encompass this ticket and related work.

[chadwhitacre]

Sticking with this ticket for the time being for the legal/structural discussion ... what if we formalize three categories of legal relation to Gratipay, LLC:

• volunteer,
• contractor, and
• owner.

"Collaborator" covers all three classes, as all are members of the Gratipay project on Gratipay (pending gratipay/gratipay.com#4299), and all compensation runs through twyw and looks the same from that point of view. Perhaps the requirements to become an owner are something like:

1. At least two years as a non-owner collaborator (i.e., a volunteer and/or contractor).
2. Permission from the United States to co-own a US LLC (basically, an SSN or ITIN).
3. Consensus of the existing owners.

[chadwhitacre]

Re: non-cooperative operating agreements:

https://en.wikipedia.org/wiki/Operating_agreement
http://www.northwestregisteredagent.com/pdf/operating-agreement.pdf

[chadwhitacre]

Draft bylaws (!m @clone1018). How do bylaws relate to operating agreement?

[chadwhitacre]

bylaws:corporation::operating agreement:LLC

https://www.google.com/search?q=bylaws+operating+agreement

So we need an operating agreement (and not bylaws).

[chadwhitacre]

Many tabs open, down the rabbit hole.

CHAPTER 88: LIMITED LIABILITY COMPANIES (seems to have replaced Chapter 89?)

[chadwhitacre]

LLCs in General

LegalZoom overview of operating agreements (non-cooperative)

A random member-managed operating agreement (non-cooperative)

Worker-owned Co-ops in General

More general guidance on coop structure from SELC.

Choosing a Business Entity

Worker-owned Co-ops as LLCs

general guidance on worker-owned coops as LLC

@JanelleOrsi's cartoon bylaws for a particular worker-owned coop

Details, details, details ...

Tax implications for members:

• LLC is more complicated than a C-Corp
• LLC is supposedly easier to deal in foreign owners—a definite consideration for us—but the tax hit is then 35-40%(!!) ... and are C-Corps really that hard?

active vs. passive members (etc., etc., etc., etc.)

splitting profits and equity incentives and retaining earnings

loaning money to one's own LLC

manager-managed vs. member-managed

taxed as partnership vs. corporation

guaranteed payments vs. distributions (old but seemingly still applicable)

(P.S. Indie.vc wouldn't need to be a member)

[chadwhitacre]

To: CPA

If I bring on a foreign partner in Gratipay, LLC, I believe we'll need to withhold 39.6% of payments to them (whether guaranteed payments or distributions proper), yes? But then it also sounds like they can file for a refund, yes? How do we estimate how much their refund will be and therefore what net tax burden to expect?

[chadwhitacre]

Yes, you need to withhold on those payments and amount to withhold and remit to the IRS is 35%. A good estimate on the net tax amount is about 25%

[chadwhitacre]

The tax examples in http://cdi.coop/coop-llc-individual-member-taxes/ come out to 30-35% for a domestic member—close enough to that of a foreign member that I don't think we should worry about any discrepancy there. The ease with which we can bring on foreign members to an LLC vs. C-corp more than makes up for a percentage point or three.

[chadwhitacre]

The "minimalist six-member board" idea above at #72 (comment) is bad because we want people who hang around here a long time to become owners rather than employees.

[chadwhitacre]

Starting over with the #72 (comment) stew in my head ...

[chadwhitacre]

Moving to a PR in #1074.

Draft is taking shape here:

https://gratipay-operating-agreement.herokuapp.com/big-picture/operating-agreement

[chadwhitacre]

Gratipay now has a cooperative operating agreement! 📜 💃 🌻

A hearty thank you to everyone who participated in this thread! 👏 👍 💯