Considerations on a non-profit home for your project

Thursday 5 December 2013 by Bradley M. Kuhn

[ This post of mine is cross-posted from Conservancy's blog.]

I came across this email thread this week, and it seems to me that Node.js is facing a standard decision that comes up in the life of most Open Source and Free Software projects. It inspired me to write some general advice to Open Source and Free Software projects who might be at a similar crossroads0. Specifically, at some point in the history of a project, the community is faced with the decision of whether the project should be housed at a specific for-profit company, or have a non-profit entity behind it instead. Further, project leaders must consider, if they persue the latter, whether the community should form its own non-profit or affiliate with one that already exists.

Choosing a governance structure is a tough and complex decision for a project — and there is always some status quo that (at least) seems easier. Thus, there will always be a certain amount of acrimony in this debate. I have my own biases on this, since I am the Executive Director of Conservancy, a non-profit home for Open Source and Free Software projects, and because I have studied the issue of non-profit governance for Open Source and Free Software for the last decade. I have a few comments based on that experience that might be helpful to projects who face this decision.

The obvious benefit of a project housed in a for-profit company is that they'll usually always have more resources to put toward the project — particularly if the project is of strategic importance to their business. The downside is that the company almost always controls the trademark, perhaps controls the copyright to some extent (e.g., by being the sole beneficiary of a very broad CLA or ©AA), and likely has a stronger say in the technical direction of the project. There will also always be “brand conflation” when something happens in the project (Did the project do it, or did the company?), and such is easily observable in the many for-profit-controlled Open Source and Free Software projects.

By contrast, while a for-profit entity only needs to consider the interests of its own shareholders, a non-profit entity is legally required to balance the needs of many contributors and users. Thus, non-profits are a neutral home for activities of the project, and a neutral place for the trademark to live, perhaps a neutral place to receive CLAs (if the community even wants a CLA, that is), and to do other activities for the project. (Conservancy, for its part, has a list of what services it provides.)

There's also difference among non-profit options. The primary two USA options for Open Source and Free Software are 501(c)(3)'s (public charities) and 501(c)(6)'s (trade associations). 501(c)(3) public charities must always act in the public good, while 501(c)(6) trade associations act in interest of its paying for-profit members. I'm a fan of the 501(c)(3)-style of non-profit, again, because I help run one. IMO, the choice between the two really depends on whether you want the project run and controlled by a consortium of for-profit businesses, or if you want the project to operate as a public charity focused on advancing the public good by producing better Open Source and Free Software. BTW, the big benefit, IMO, to a 501(c)(3) is that the non-profit only represents the interests of the project with respect to the public good, so IRS prohibits the charity from conflating its motives with any corporate interest (be they single or aggregate).

If you decide you want a non-profit, there's then the decision of forming your own non-profit or affiliating with an existing non-profit. Folks who say it's easy to start a new non-profit are (mostly) correct; the challenge is in keeping it running. It's a tremendous amount of work and effort to handle the day-to-day requirements of non-profit management, which is why so many Open Source and Free Software projects choose to affiliate or join with an existing non-profit rather than form their own. I'd suggest strongly that the any community look into joining an existing home, in part because many non-profit umbrellas permit the project to later “spin off” to form your own non-profit. Thus, joining an existing entity is not always a permanent decision.

Anyway, as you've guessed, thinking about these questions is a part of what I do for a living. Thus, I'd love to talk (by email, phone or IRC) with anyone in any Open Source and Free Software community about joining Conservancy specifically, or even just to talk through all the non-profit options available. There are many options and existing non-profits, all with their own tweaks, so if a given community decides it'd like a non-profit home, there's lots to chose from and a lot to consider.

I'd note finally that the different tweaks between non-profit options deserve careful attention. I often see people commenting that structures imposed by non-profits won't help with what they need. However, not all non-profits have the same type of structures, and they focus on different things. For example, Conservancy doesn't dictate anything regarding specific CLA rules, licensing, development models, and the like. Conservancy generally advises about all the known options, and help the community come to the conclusions it wants and implement them well. The only place Conservancy has strict rules is with regard to the requirements and guidelines the IRS puts forward on 501(c)(3) status. Meanwhile, other non-profits do have strict rules for development models, or CLAs, and the like, which some projects prefer for various reasons.

Update 2013-12-07: I posted a follow up on Node.js mailing list in the original discussion that inspired me to write the above.


0BTW, I don't think how a community comes to that crossroads matters that much, actually. At some point in a project's history, this issue is raised, and, at that moment, a decision is before the project.

Posted on Thursday 5 December 2013 at 13:40 by Bradley M. Kuhn.

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