Forum:RationalWiki LLC?

I am seriously starting to consider moving forward with the creation of a legal RationalWiki entity that extends beyond me. An LLC seems to be the most logical approach, but there are a lot of ways to go. On the one hand it is not a big deal as it wouldn't immediately effect the way RW was run, but on the other it has potential to drastically effect things like ownership of hardware, content and certain rights; legal responsibilities; and shape potentially what a post-me RW would look like and how it would operate. If anyone has any feelings, personal insight, or ideas about how they would like to see something like this move forward, now is the time to offer it up. tmtoulouse 18:43, 31 March 2010 (UTC)
 * Hmmmm not really my area of expertise or knowledge so I can't really comment. How would it effect the average user? Acei9 18:54, 31 March 2010 (UTC)
 * I'd say it's a good idea, especially as it has the advantage of shielding Trent a bit legally. It would probably increase our costs somewhat, I suspect. By the way, if we ever want to relieve Trent of the hardware burden, I have a friend who rents server space for his e-commerce customers' sites (as probably many of us do), he is also very technically competent (although I don't know how much he knows about MW setup).  20:05, 31 March 2010 (UTC)
 * It makes sense. I'm sure there'd be overhead and costs to deal with, but I can understand the need to deal with potential liabilities as the site grows. -- 23:06, 2 April 2010 (UTC)
 * I had a quick browse around. Depending on the location chosen for the LLC, it seems it could be an annual cost of anything upwards of $50. Many of the forms appear to be online. If no-one here already has some expertise, perhaps we could just dig around and bring what we find here. Would you want to form the LLC in Canada, or shop around for a location based on cost/protection? -- 23:24, 2 April 2010 (UTC)
 * get a legal opinion first, depending on the structure it may not provide much of a shield for legal issues. You may be able to lease/rent all the equipment /software to the corporation which protects it from loss if the corp goes bankrupt. You may need to incorporate in the state the server is located or where the majority shareholder resides. Hamster (talk) 23:43, 2 April 2010 (UTC)

The specific legalities of many of the issues I am fairly familiar with, and am consulting with several people to get a firmer handle on the situation. The basic structure will be to form the LLC in New Mexico as I have assumed residency there because of an intent to return, drivers license, voter registration, etc.

The biggest thing it gives is a set way to procedural file a claim against the site. Right now things are pretty screwy and just figuring out how to issue me a summons, or file a complaint is likely to be pretty confusing. Having an LLC gives us a registered agent in a set location, and a set procedure for handling any legal issues. It also potentially offers certain kinds of protection.

On a day to day basis, forming an LLC and turning everything over to it changes who you, as an editor, are granting permission and rights to content. Everything is still CC-BY-SA but RationalWiki, LLC pretty much squats on the general right to a lot of the content rather than "Trent Toulouse." There are also issues that might have to be worked out when dealing the perpetuity issues. What happens to RW in the event that I give up, convert, or get run over by a bus? The LLC will need an operating agreement that spells out those kinds of issues. Do I maintain full rights and does it die with me? Are there additional members who have rights, can pass those rights on, can we have new members? What does it mean to be a member, and how does control of the LLC get worked out. These are the kinds of issues that will need to be established, and the more feedback about what you guys would want to see, and would be comfortable with the better.

Ultimately, it is something that I am just going to have to do, and do in a way that is feasible and legal. So I may just have to make certain executive decision that may or may not be popular. I would hope everyone has enough trust in me to know that I am not after personal gain or glory and would try and do whats best for the site as a community. tmtoulouse 08:59, 6 April 2010 (UTC)
 * Delaware. Also, get lawyer.  Real lawyer.  I suspect you know one. I think SS by CA survives LLCship.  09:13, 6 April 2010 (UTC)

Legal questions
I think the conversation would be easier if we split this in to categories. It'll help to keep the social side separate from the legal bits. A bulletted list may work. 09:44, 6 April 2010 (UTC)
 * licences. Can we still use non-commercial CC stuff?
 * who would be a member/director?
 * will shares be issued?
 * Will someone hold a full backup so we can start again if the LLC goes down?

I think we wont have any problem maintaining a non-commercial license as long as we don't sell our content. The only issue, and its somewhat small, is that when you submit content to RW it is CC-BY-SA with clause that you are giving RW rights to use that material. And when a lot of editors have contributed content, while they each maintain copyright on their specific edits, the content as a whole winds up belonging to RW and would be RW that would make a copyright violation complaint. Right now the entity that is RW is me, so you are granting me these rights. With an LLC it would be the LLC you are granting these rights to. Not a big difference but it is there.

I would certainly need to continue to exercise fairly exclusive control over RW for the time being, as I am the only one in a position to make and execute decisions or actions that maybe necessary to keep the site going. However, if I am the only member and there is no perpetuity clause then the LLC "dies with me." We could however, add clauses to add members, and let the LLC continue after I give up or get run over by a bus.

An LLC doesn't have shares in the since of a corporation, but it can have shares in the sense of percent interest in assets, debts, and voting power. These are the same issues as "members" above pretty much.

A full backup of the site, including user information and passwords is not something that could be distributed. However, I have been thinking about implementing database dumps that contain the content and histories of the site and making those available for download. That would allow any RW user to have what amounts to a content backup for the site. There are several things that would need to be worked out before proceeding with it. tmtoulouse 19:59, 6 April 2010 (UTC)
 * LLC's don't have shares. You'd do better as an S corp which does. An S corp requires Articles of Incorporation and an S Election filed with the IRS. The benefits to an S corp are so called "pass though" income reported on Schedule K-1 from a Form 1120S. LLC's file a Form 1065, and here's the killer, Schedule SE at 15.3% of income on the first dollar of income, i.e., no personal exemption, no deductions. 1065 filers really take it in the shorts.


 * By contrast, an S corporation shareholder can take income out of the corporation as dividends, not subject to Social Security and that godawful Medicare tax. You only have to show income in 2 out of every 5 years. But there's risk in being declared an abusive tax shelter if your setting it up just to write off losses and have no plans to generate real revenue and profit (kinda like Bernie Madoff or Ken Ley, they can "pierce the corporate veil" if they can prove you never really intended to conduct legitimate business and only adopted the corporate form to escape personal liability for frauduent activity).


 * A 990, that is, a non-profit I'm only vaguely familiar with but do know good CPA in New Mexico who concentrates in that area. nobsdon't bother me 03:53, 12 April 2010 (UTC)