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.

[chadwhitacre]

All large cooperative and membership organizations (nonprofits, worker-owned enterprises, etc.) that seek to govern themselves democratically face a perennial problem. How can an organization maintain member interest in matters of organizational governance year after year, and avoid management capture?

http://www.coopwatercooler.com/discussions//4m79q1m88fwktufew30pyeg3k4i9zh (h/t)

Sortition! 💃

[chadwhitacre]

Here is lots of opinionated theory and some(?) howto on worker cooperatives. And here is a documentary about worker cooperatives called, Can We Do It Ourselves?.

[chadwhitacre]

I am imagining gratipay.coop in the address bar.

---

---

---

[chadwhitacre]

From @jdaviescoates in https://open.coop/2016/06/23/not-a-co-op-not-a-platform-co-op/:

I much prefer this perspective from the good people at Gratipay; they are very much moving in the right direction and are very closely aligned to both the Platform Co-op and Open Co-op visions, but are in full awareness that they aren’t quite there yet.

☺️

Regardless of legal structure (there are actually plenty of unincorporated co-ops), the key thing is that to be considered a co-op (and therefore a Platform Co-op) you ought to uphold the internationally agreed co-operative values and principles.

That would be easy enough for us to do by inlining them into our values statement, and would even seem to be enough to make us eligible for a .coop domain ("Are you [...] an organization that is committed to the seven cooperative principles [...] Then you are eligible for a .coop domain!"). Hmm ... :thinking:

Ownership really does matter. A lot. And allowing “Platform Co-op” to mean “a company started by nice people with good intentions who also built an app” will result in the term quickly becoming meaningless.

I still think there's something to be said for the open source principle of forkability as an accountability measure. There's a sense in which forkability is the ultimate democratic ownership, as @Changaco has, I think, amply demonstrated. :grin:

[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 https://github.com/gratipay/gratipay.com/issues/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 https://github.com/gratipay/inside.gratipay.com/issues/72#issuecomment-166668883 is bad because we want people who hang around here a long time to become owners rather than employees.

[chadwhitacre]

Starting over with the https://github.com/gratipay/inside.gratipay.com/issues/72#issuecomment-301618663 stew in my head ...

[chadwhitacre]

Moving to a PR in https://github.com/gratipay/inside.gratipay.com/pull/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! 👏 👍 💯