I can probably address some of the questions about the choice of a
cooperative model.

In general, a nonprofit organization is not allowed to have
shareholders and instead has a board governing it, which generally
chooses themselves unless they choose to define a category of "member"
which can choose the board.  Although members in nonprofit
organizations can exercise certain rights, they are not considered to
be "owners" of the organization.  In general, a cooperative is an
organization in which the members are the owners, and they are allowed
to distribute profits to the members, whereas a more traditional
nonprofit does not have owners and merely has a board.

Cooperatives may be either stock-based or non-stock based, though,
depending on the state, and also some states allow for both for-profit
and non-profit cooperatives.  There's also an additional distinction
between consumer cooperatives (owned by the users of the business),
worker cooperatives (owned by the workers of the business, and
multi-stakeholder cooperatives (owned by the users, workers, and
others with a stake in the business). was envisioned as a non-stock, non-profit,
multi-stakeholder cooperative.  This means that it is formed for the
public good rather than the sole benefit of its members (being
nonprofit rather than for-profit), you do not purchase shares in it
when you join (being non-stock rather than stock), it has multiple
categories of membership in which you can join (being
multi-stakeholder rather than consumer or worker coop), and that it is
legally "owned" by its members rather than lacking owners and just
being overseen by a board (being a cooperative and not a standard

I should add: being incorporated as a non-stock, non-profit,
cooperative on the state level does not necessitate or guarantee any
particular federal tax status.  There is no such thing as a "federal"
corporation, and so the structure and incorporation status is all
based on the laws of the individual state.  There have been some
issues with getting federal nonprofit tax status in terms of
FLO-sponsoring organizations, but that does not affect the choice of
incorporation at the state level.


On Sun, Nov 6, 2016 at 9:09 AM, Aaron Wolf <> wrote:
> 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)?
> 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
> and the legal details that get into things still being worked out (and
> the pages are a little dated, some updates are needed)
> Hope that answers your questions.
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@ james sheldon
@ "those who fail to reread
@ are obliged to read the same story everywhere"
@ -- Roland Barthes, S/Z (1970)
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