On 11/06/2016 06:46 AM, Mark.wayne90 wrote:
> How does Snowdrift solve the "escrow problem". Or in other words, the
> legal issues of holding people money without being illegal. In this
> regard, how is a company (such as Patreon) different from a non-profit?
> Are there different requirements for companies and non-profits? Do you
> actually hold people money, or do you just "move" from patrons to
> developers once a month (but you don't hold any money)? Moreover, if you
> wanted to make a non-profit, why did you choose a COOP? What about other
> non-profit structures (non-coop)?
> 

Snowdrift.coop avoids escrow entirely. We had hoped that we could do it
legally because the "wallet" approach (i.e. escrow effectively) is an
easier, nicer way to operate and avoid fees. However, instead of that,
we simply NEVER will hold money AT ALL.

We calculate donations monthly, just keep a running bill until the total
is large enough to be worth charging given the minimum processor fees.
At that point, we will tell Stripe to charge the patron and pay the
projects, and we never touch the money AT ALL. So, there is no escrow.

This is also how Patreon and Kickstarter work. They do not hold money at
all. All of us only do per-authorization via the payment processor to
make sure the payment details are valid, but we don't actually process
the charge early and never hold money.

A non-profit is, in the U.S., a state-level designation. It says that
the organization serves some public-interest mission at least to the
extent that 100% of the money goes to the mission (which can include
paying normal, reasonable salaries to employees) and there are no
investors who get a return, i.e. a profit. So, for example, in our case,
I have invested substantial money and time in this project. I will never
get any profit from it. The most I may ever see is a job with a salary
*if* the co-op decides to hire me for a paid position, but then I'd only
get paid for work going forward. I'm not an investor, and all the money
I've put in so far doesn't give me a financial stake or anything.

Patreon is not a non-profit because they actually are truly in every
sense for-profit. They have accepted millions of dollars from venture
capitalists in exchange for giving those VC's stock in their company,
and they intend to take in more money than is needed to just cover cost
of operations, take all that profit, and distribute it to the investors
who get richer. Maybe they will sell out to some larger corporation
sometime and take the large buyout and distribute the profits among the
investors. That's typical for-profit stuff. That's how Patreon is set
up, and 100% of the power in the decision-making is in the hands of a
few people who have to balance their interest in profit with the other
goals of the organization.

A "co-op" is a different issue in that it basically refers to ownership
by the community and democratic operations. In some states, co-op and
non-profit are distinct concepts, but not all. Co-ops can be for-profit
where there are investors who expect returns, but among all those
investor / owners, decisions are democratic and they follow the co-op
principles and ethics, or a co-op can be non-profit where it's mainly
about the decision-making and who gets to participate that determines
the co-op aspect.

So, the main purpose for us of choosing a co-op is because we believe in
the value of having everyone involved in the system be able to have a
say in the decision-making. And we wanted this signaled strongly enough
to tie that value to our name (you can run democratically without
necessarily calling yourself a co-op).

If Patreon were a co-op, they could still be for-profit but they would
not be allowed to have big venture capitalists own all the stock.
Instead, they could be a worker co-op where the employees are the owners
or a multi-stakeholder co-op as we plan to be where the patrons and
projects and employees all own shares in the company. Either way,
everyone would get a share of the profits. But they are not a co-op,
they are a traditional top-down company.

For more on all this see
https://wiki.snowdrift.coop/about/co-op
and the legal details that get into things still being worked out (and
the pages are a little dated, some updates are needed)
https://wiki.snowdrift.coop/legal

Hope that answers your questions.

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