SoylentNews

NOTE: For those who aren't interested in "meta" articles, just ignore this one. There's an update coming down the pipe to allow people to filter out content from the main page which will hopefully be live rather soon.

As some have may gathered, given our recent push to collect statistics on the site, we're working hard to identify and understand viable fundraising methods that we can use to keep SoylentNews up and running without alienating the community. We are looking at a number of options, including subscriptions for premium services, and it remains our goal to avoid running ads on the site, if at all possible. As it turns out, getting a firm grasp on realistic fundraising estimates has proven to be the determining factor in how we incorporate.

As I've stated previously, I had intended for us to start by forming a not-for-profit (NFP) with the possibility of 501(c)(3) tax-exempt status, and I had several conversations with various legal and tax authorities about this. The idea was that the NFP would serve as an umbrella organization, under which independent sites, including SoylentNews, could operate. What I didn't realize at the time was that setting up a structure like this from the beginning would be far more difficult and expensive than I anticipated. So, simply put, we've found it necessary to change plans. As described in more detail below, NFPs have heavier burdens due to the strict rules imposed on them for the usage of revenue and resources. Furthermore, in talking with our prospective lawyer and accountant, it quickly became evident that we would have significant burdens and hurdles to clear if we proceeded with the original plan to set up the NFP immediately. When I met face to face with the staff, we began working out what the costs of NFP incorporation was going to look like, and it was getting close to $8,000 USD simply to get everything vetted by the lawyer and accountant because of retainers and other such overhead; this was just to get things established and did not deal with items such as ongoing financial reporting and other requirements.

I always wanted SoylentNews (SN) and its staff to have relative autonomy as a not-for-profit, with the site and its community paramount, and to slowly morph to a fully democratic model once we were relatively stable. To do so would require a defined relationship between SoylentNews and the NFP in each organization's bylaws, which opened all sorts of legal questions on how funding and such would be handled. It quickly became evident that the cost of setting up this kind of structure would be very high, and it was unclear if SoylentNews could re-coup those costs in a timely matter. We could easily end up in a situation where resources were exhausted and yet we needed more help to get things established. It would be an unworkable situation, and not one that would bode well for the future of the site.

Here's a direct example: in the United States, NFPs need to be licensed to perform fundraising in each individual state they're receiving money from. As I outlined in both the guiding statement and the manifesto, one of the ways of raising revenue is to offer subscriptions. The money for those subscriptions would be used to support site operations. Would that be considered fundraising?

Our lawyer hi-lighted this issue when we proposed our revenue models, and wasn't sure, he said he'd have to forward the question to a certified public account or to the state for an answer. This is only one example of "known unknowns" we came up with (mrcoolbp filled two legal sized pages with these when we sat face to face). Needless to say, the situation wasn't looking good, but we've come up with a plan, and I want the community to vet it before we proceed.In general, companies (not NFPs) have a legal responsibility to raise funds and revenue for their owners, a concept known as "shareholder primacy", first defined in Dodge v. Ford Motor Company, while not-for-profits only exist to further their mission (in exchange for the possibility of eventually getting tax-exempt status), and are subject to strict and complicated rules which are often not clear cut. SoylentNews and its staff itself exist to serve its community and its mission - in spirit, we're already a not-for-profit - but at this moment we simply don't have the resources to avoid hitting landmines in what has proven to be very murky waters.

This left us in a difficult catch-22. We could proceed with what resources we had, and risk everything blowing up in our face or try to find a simpler way to get things set up in the short term to allow us to begin fundraising to keep the site running. Of course, I realized that if we were to about-face and incorporate as a for-profit, it would be both a slap in the face of the community and would risk destroying the rapport we built up with the community and well as any trust or good-will we've built up since go-live. Fortunately, we think we've found a way to proceed that will maintain the spirit of what I want SoylentNews to be.

During our face to face, matt_ offered an alternative that I had not previously heard of: a benefit corporation (also known as a B Corp). For those of you scratching your heads wondering what it is, you're not alone. Benefit corporations are a new type of corporation that came to exist in 2010. Summed up, a benefit corporation is a for-profit corporation that exists for public benefit and can be seen as a middle ground between a traditional for-profit entity and a not-for-profit. Under a B corporation, the board of directors are bound to "pursuing the creation of general public benefit, and any named specific public benefits, is considered to be in the best interests of the corporation." In line with this, our certificate of incorporation would contain the following statement, or one like it: The specific public benefit purpose of the corporation is to engage in and promote free, open journalism through the production and publication, and community-sourced analysis and discussion of news and original and third-party-sourced works of fact and opinion. Under a B corporation, as long as we succeed in this mission, we will have, by definition, fulfilled our corporate responsibility.

I realize this is a fairly large departure from what our original plan was, but I think it would be folly to charge ahead with the original plan in light of what we know now with the resources we have available. As a B corporation, we will be able to operate as a traditional corporation in terms of both raising and spending revenue and would be treading in much safer legal waters. Furthermore, our incorporation costs will be in the hundreds, not thousands, of dollars. Finally, and most critically, setting the site up in this way does not prevent us from establishing the not-for-profit in the future once we are financially stable. As described below, this plan allows us to turn into (technically, be acquired by) the not-for-profit, if and when doing so becomes financially possible.

I do, however, want to make this clear, right here, right now. I'm not going to do something that's going to outrage the community. If you think we're in error, let us know. If we have to, we'll scrap the B corporation, and figure out a way to make things work as a pure not-for-profit. I'll be damned before I piss off the community and cause a "beta-like" folly which alienates everyone -- I'm pretty sure all the staff would agree with that sentiment. The wikipedia page and the Benefit Corporation Information Center have considerably more detail; I ask that folks take a look at these pages to understand the details at hand before coming to a conclusion one way or the other...

Now, with all that said, I still feel that eventual incorporation as a not-for-profit could still be beneficial for us. In the revised incorporation plan, after we incorporate as a B corporation, we intend to get the corporate charter and operating procedures of the site straightened out to the point that SoylentNews is a self-sufficient and fully operational independent entity. After that process is complete, I intend to use the resources of the B corporation to re-evaluate becoming a NFP corporation. If we (both the staff and the site) feel this is beneficial once we are able to fully answer our major outstanding "known unknowns", we will sell the B corporation to the newly-incorporated not-for-profit, and the site will continue as a benefit corporation owned by a not-for-profit corporation.

The eventual end result will be an independent SoylentNews that is able to operate freely as an independent entity with manifest destiny, and which will be owned by a not-for-profit that will protect the site and fight for the rights and protections that we all believe in. I hope to build SoylentNews into a shining example of what journalism and press should be, with a structure that enables us to fight to protect our rights, increase public education, and help restore integrity to the field of journalism.