It actually wasn't a partnership relating to 501(c)3, but just a partnership in general. I can't go into much more detail without airing dirty laundry, but the take-away is basically what I said earlier; make sure their goals align with your own, there's no unacceptable/hidden strings attached, and don't take silence as an acceptable answer. If someone isn't willing to put something down in writing, that's a red flag.<br>
<br><div class="gmail_quote">On Mon, Jul 9, 2012 at 6:47 PM, James Carlson <span dir="ltr"><<a href="mailto:james@schoolfactory.org" target="_blank">james@schoolfactory.org</a>></span> wrote:<br><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex">
Awesome insights, Will. <div><br></div><div>As to the question about members starting and/or running for-profit businesses from the space, this again should not run counter to the 501c3 rules. (It may run counter to the culture or values of the space, but that's another matter for the community to decide.) </div>
<div><br></div><div>Many business incubators are themselves non-profit organizations, because they consider their mission to be an educational one related to supporting new business formation. At <a href="http://www.bucketworks.org" target="_blank">Bucketworks</a> in Milwaukee, many of our members have created/are creating 'jobs' for themselves that more fully express their creative and intellectual passions. Sometimes these become startup businesses that end up graduating out of our space; sometimes they stay because the job is really just a part of the lifestyle. </div>
<div><br></div><div>Since we are fulfilling our mission by supporting these activities, offering these members access at lower than market rates for the value, and not taking a cut of their success, the IRS policies support the activity.</div>
<div><br></div><div>A key underlying principle of 501c3ness is 'making financial information as transparent as possible'--this helps board members and even members of the community spot problems before they become problems. </div>
<div><br></div><div>You spoke about a bad experience hitching with another 501c3. The School Factory sponsors 18 spaces scattered around the country, and we're always trying to improve how/what we do (since we also manage and run a space we are very connected to this and want to do it well.) Without breaking privacies and such, what can you share about your experience? </div>
<div>
<br><div class="gmail_quote"><div><div class="h5">On Mon, Jul 9, 2012 at 5:44 PM, Will Bradley <span dir="ltr"><<a href="mailto:bradley.will@gmail.com" target="_blank">bradley.will@gmail.com</a>></span> wrote:<br></div>
</div><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex"><div><div class="h5">
This is a great thread and mirrors HeatSync Labs' experience getting its 501(c)3. We're an educational nonprofit, and memberships basically pay for the rent and tools. We keep our doors open to the public and hold classes regularly. If we get much more money, I'm sure we'd expand our teaching/outreach.<div>
<br></div><div>I'm not a lawyer, but my argument is, the space itself and tools within it, when combined with a bit of instruction, are themselves providing self-directed education. Without the space or tools, people like us wouldn't be able to learn. They're learning resources. This is an important distinction to make, because a good "charity" spends a healthy percentage of its money on fulfilling its charitable mission. Our mission IS to provide space and tools, so we're good as long as we aren't spending thousands on parties or "overhead" expenses.</div>
<div><br></div><div>Comments:</div><div><br></div><div><div><span style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">Our local hackerspace is looking at becoming a 501c3, independent of</span><br style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">
<span style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">any other entity.</span><br style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">
<br></div> - I believe it's important to be somewhat independent. If you choose to hitch your wagon to another entity, do all you can to make sure their vision is aligned with yours and that there are no hidden or undesirable strings attached. We've been bitten by this before.<div>
<br>
<br style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif"><span style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">Is your hackerspace a 501c3? How does it affect the day to day</span><br style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">
<span style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">operations of your space? Are there limitations on the use of donated</span><br style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">
<span style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">versus non-donated funds? (Donations vs dues and class fees, etc)?</span><br style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">
<br></div> - We are. It doesn't affect too much, although if members stopped opening the doors to the public or being helpful to newbies, we'd have to step in and adjust to make sure we were staying true to our mission. We can't afford to be insular. Due to our nonprofit status, many members have a slight aversion to using the space for profitmaking activities. This is fine, except that it can prevent inventions from becoming successful businesses. It takes some effort to maintain a friendly atmosphere for more-than-hobbyists.</div>
<div> - If we have a big donor, we frequently ignore that money for budgeting purposes since it could go away at any time. When it comes time for a large tool purchase or emergency, then that money is there, but we don't count on it. We aim to be (and are) self-sufficient on memberships alone. I call it the "gym model" -- there's a certain ratio of dollars to members to daily activity and you're aiming for a sweet spot.</div>
<div> - Class fees are intended to compensate the instructor and go towards machine maintenance, but I'm not aware of strict accounting for it. Simply, the more people trained on a machine, the more people likely to use it. But we wouldn't want to deny a machine maintenance because of insufficient class fees.<br style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">
</div><div><div><br style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif"><span style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">One of the arguments being put forth is that members must not work on</span><br style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">
<span style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">individual projects, because that would be a benefit to the member</span><br style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">
<span style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif">versus the public, and somehow violate the 501c3 rules.</span>
</div><div><span style="color:rgb(34,34,34);font-size:13px;font-family:arial,sans-serif"><br></span></div></div><div><span><font color="#222222" face="arial, sans-serif"> - Others have described this issue more fully, but we were never made aware of this argument during our 501(c)3 application. The underlying principle is, make sure a good percentage of your expenditures can be labeled as directly benefiting peoples' education, and all expenditures or savings must be allocated somehow. If you save up a bunch of money, it's ok, just explain what you're saving it for. (Rainy day fund, big tool purchase, etc.)</font></span></div>
<div><span><font color="#222222" face="arial, sans-serif"><br></font></span></div><div><span><font color="#222222" face="arial, sans-serif"><br>
</font></span></div><div><span><font color="#222222" face="arial, sans-serif">One gotcha we were made aware of is selling things or competing with business. For example if you sell Arduinos, make sure they've got your logo on them, are ideally part of an "educational kit", and are not priced competitively with Radio Shack or Adafruit. You don't need to charge sales tax on items you sell; you can't use that advantage to compete with anyone. If you sell t-shirts, make sure they're promotional/fundraising gear with your logo on them, and you're not competing with the t-shirt business next door, or Threadless, or Walmart. The good news is, as a nonprofit people will tend to be ok with paying a bit more than retail.</font></span></div>
<div><span><font color="#222222" face="arial, sans-serif"><br></font></span></div><div><span><font color="#222222" face="arial, sans-serif">The example we were given was, the Red Cross can sell first aid kits, but they can't be priced or marketed competitively with Johnson & Johnson first aid kits; ideally, they should be </font></span><span style="color:rgb(34,34,34);font-family:arial,sans-serif">obviously-</span><span><font color="#222222" face="arial, sans-serif">promotional items for the Red Cross' humanitarian mission. OR, the Red Cross could give them away to needy people as part of their humanitarian mission. (In fact this was the subject of a landmark lawsuit both for trademark and nonprofit law: </font></span><a href="http://en.wikipedia.org/wiki/Emblems_of_the_Red_Cross#Johnson_.26_Johnson_v._American_Red_Cross" target="_blank">http://en.wikipedia.org/wiki/Emblems_of_the_Red_Cross#Johnson_.26_Johnson_v._American_Red_Cross</a>)</div>
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