From Gallery Codex

As of 2006-03-02, it has been officially decided that we will establish the Gallery Software Foundation as a California Nonprofit Public Benefit Corporation.

Documents

Articles of Incorporation

The Articles of Incorporation is the document that will be filed with the California Secretary of State to officially establish the Gallery Software Foundation. Since the Foundation intends to seek 501(c)(3) tax-exempt status from the IRS, the Articles will be drafted with IRS-mandated language.

Bylaws

The bylaws are the rules for running the foundation.

Benefits of a Non-Profit Organization

This text is presented to you on the premise of the assumption that Gallery will clearly benefit from establishing a legal non-profit entity representing the current movement. While tackling the existing goals and challenges could certainly be attempted with the existing infrastructure, many of the goals will be accomplished faster, easier, and most of all with increased success if/when supported by a legal entity. Such a non-profit organization presents the following benefits:

• Procedural authority: A non-profit corporation gives a framework in which individuals are authorized to sign contracts, open bank accounts, own trademarks, perform fundraising, and develop procedures. This is possible at no risk or liability to the individuals, who remain protected due to the corporation status of the organization. Also, individuals, upon assignment of a task, can use funds necessary to complete them without having to draw on personal resources and without reimbursement procedures.
• Fund-Raising: Any organization certified as a federally recognized tax exempt organization receives donations more easily and in larger amounts than it would without tax-exemptions for donors. As a charitable organization, Gallery will become eligible for donations from charitable funds set aside by Fortune 1000 corporations. In concert, these benefits ensure that individuals, after having been given responsibility for certain tasks, will have the resources available to complete them.
  • Since the approval of tax-exempt status by the IRS may take up to 15 months, an intermediary solution should be sought. While the tax deductible status would apply retroactively to the incorporation date of the organization, donors wishing to take tax exemption for their donations would be forced to re-submit their tax forms, which obviously will make them more hesitant or prevent them altogether from making donations to Gallery projects. To bypass this hindrance, we could follow the lead of the Mozilla Foundation, who found another existing 501c3 to be the temporary funding collector until the 501c3 certification is issued.
• Tax Deductions for Code Contributors: Organizations or individuals contributing substantial quantities of code are eligible for a tax deduction under two conditions:
  • The work product is donated to a tax deductible non-profit organization. This condition is met only when Gallery has formed a non-profit corporation and been granted 501c3 classification by the IRS.
  • The work product underwent a qualified appraisal stipulating the value of the code. This condition is met when the appraisal is furnished by an entity other than the donor (developers) or the recipient (the 501c3 organization).

What Is Required for Tax-Deductible Status?

The following items are required to apply for Tax Deductible Status:

• Articles of Incorporation including:
  • a Dissolution Clause specifying that all assets will be distributed to other 501c3 organizations
  • organizational purposes specifying the mission of the organization
• Bylaws
  • A definition of organizational membership
  • Election Procedures for the Board
  • Rules for Decision Making By the Board
• Source of Initial Contributions
• Two year proposed budget
• Form 1023: Application for Recognition of Exemption Under Section 501c3

What Must Be Decided Prior to Forming the Non-Profit Corporation?

Prior to filing to form a corporation we must agree to Articles of Incorporation and Bylaws.

• We need to determine which state the Foundation will be incorporated in.
• The Articles of Incorporation must be created for the Gallery Software Foundation, which limits the organizational activities to those associated with Educational, Literary and Scientific activities as defined in IRS Publication 557 Chapter 3.
• The Bylaws must define and describe
  • the role and responsibilities for
    • The Board of Directors
    • The Officers/Staff
  • The procedures for
    • Membership entry, terms and conditions, and exit
    • Decision-making, complaints and conflict resolution, disciplinary procedures
  • Remuneration, appraisal petition

Where to incorporate

The Gallery Software Foundation can be incorporated in any state, although the state with the lowest registration fee that a Core team member lives in is the most economical. A corporation needs to have a registered agent, a person or company that accepts process service. Companies that provide registered agent service typically charge $300 or so per year for the service - a core team member could serve as registered agent at no additional cost to the Gallery Software Foundation.

Recommended Course of Action

1. Decide that non-profit corporation will be formed (done - 2006-03-02)
2. Define initial Officers (roles, responsibilities, authority limits) (to be discussed on -core)
3. Draft and approve Articles of Incorporation and Bylaws (on schultmc's TODO)
4. Incorporate as a Non-Profit in a chosen state (on schultmc's TODO)
5. Obtain bank account, Federal Employee Identification Number
6. File for Tax Deductible status (Form 1023) to IRS
7. Identify initial donors
8. Plan initial project(s) with project budgets
9. Determine staffing requirements
10. Draft and approve budget
11. Obtain donations
12. Public Relations: Trademark Name (?), Logo, Website, Promotional Materials
13. Begin funding development projects