Incorporating FreeVPS.org

Not_Oles

Hello!

Earlier this month FreeVPS.org passed its first birthday! Notably, FreeVPS continues adding new node sponsors and also new node neighbors. it looks like FreeVPS might live a good, long life!

FreeVPS has neither revenue nor expenses. Everything is volunteer. Therefore, FreeVPS needs help getting formally registered/incorporated as a legal entity.

• Is anybody an attorney or a solicitor who might help pro bono?

• Where should FreeVPS incorporate? We are all over the world! 🌎🌍

Thanks @GTHost, @crunchbits, @Scaleblade, @PieHasBeenEaten, @Abdullah, @AnonymousSponsor, @DP, @Cloudie, @VirtFusion!

Best wishes!

Tom

dvo

Is there any particular reason why you want to incorporate? The reason why I ask, is because it seems you guys have literally zero cash flow.

I’m going to assume by incorporate you mean as a non-profit. Even as a non-profit, most charge a reasonable membership fee then try balance the books with cash donations. As once you incorporate, you now have, while minor, liabilities.

Who pays the monthly fee for the bank account? Who pays for the accountant to sign off on the books? Who pays the officer/directors liability insurance?

The only reason why I could see you incorporating, is if you’re worried about the personal liabilities since everything you guys are doing, if shit hit the fan, all of you are personally liable.

Not_Oles

@dvo said:
Is there any particular reason why you want to incorporate? The reason why I ask, is because it seems you guys have literally zero cash flow.

I’m going to assume by incorporate you mean as a non-profit. Even as a non-profit, most charge a reasonable membership fee then try balance the books with cash donations. As once you incorporate, you now have, while minor, liabilities.

Who pays the monthly fee for the bank account? Who pays for the accountant to sign off on the books? Who pays the officer/directors liability insurance?

The only reason why I could see you incorporating, is if you’re worried about the personal liabilities since everything you guys are doing, if shit hit the fan, all of you are personally liable.

Hi @dvo!

Reasons to incorporate:

• To have the corporation exist as the legally responsible party.

• Which, in turn, would get FreeVPS more server node sponsors!

Recently FreeVPS had a potential server sponsor pull out because they insisted on a $5 per year payment from a member of the FreeVPS Team so that they could tell the police in their country that the person who paid was the person responsible for the server. Of course, $5 per year is "nothing" for a dedicated server. But, the $5 per year payment, even though small, means responsibility.

Within the past few days, several other potential server sponsors have asked for someone's name, address, email, and phone. If FreeVPS were incorporated, then FreeVPS' name could be used to register accounts at our sponsors.

FreeVPS went from one node to seven (eight?) in its first year. FreeVPS might have ten or more nodes now if FreeVPS had been incorporated.

Another option besides incorporating might be to form an unincorporated association in some place where the law allows it. But by the time we draft the association's charter/bylaws and go through getting all the server sponsors and all the users/neighbors to join formally, it just seems like forming a corporation might be easier.

I'm hoping that the personal liability issue remains an edge case and doesn't rear its ugly head. I am interested in the ease of administration of server accounts so FreeVPS.org can get more nodes. But, the corporation, if we had one, might be able to obtain liability insurance.

Thanks for your interest in FreeVPS!

Best!

Tom

terrorgen

You'll be introducing overheads.

Not just $5 per year dedis.

Also the annual fee to keep the incorporation active. Most US states do not charge an annual fee but may require you to confirm that the entity is still active. Jurisdictions outside the US may charge a fee.

Many places require you to maintain a physical presence (not PO box) in their jurisdiction where you incorporate. So you'll need a virtual office that can receive physical mails, or someone in that jurisdiction who is willing to place their home/business address on their registration, or hiring a Registered Agent service. Not free.

If you incorporate as a 501(c)(3) nonprofit in the US, filing taxes are easy since your income and expenses are less than $50k/yr. It's literally attesting the above annually.

Just some information for you to think through.

DISCLAIMER: I am not a lawyer, nor an accountant.

Not_Oles

Ooooh! I found a $160 one-time State of Delaware incorporation fee paid to the state, plus $50 per year for a registered agent. Over on OGF FreeVPS got a promise to contribute $40, and I promised $16. Not asking for funding right now, because FreeVPS hasn't yet decided to go ahead. But, if we do go ahead, are there folks here who would want to contribute? Only $104 left to raise! Thanks!

terrorgen

Why Delaware in particular? Your incorporation fees will be less than 30$ if you incorporate in, say Kansas.

AuroraZero

@terrorgen said:
Why Delaware in particular? Your incorporation fees will be less than 30$ if you incorporate in, say Kansas.

Easiest state to incorp in with the rules that are lax.

Not_Oles

@terrorgen said:
Why Delaware in particular? Your incorporation fees will be less than 30$ if you incorporate in, say Kansas.

Kansas might be better! Don't know if FreeVPS has anyone in Kansas on the Team or among our fine neighbors, but I wouldn't be surprised! Thanks for the tip!

terrorgen

@AuroraZero said:

@terrorgen said:
Why Delaware in particular? Your incorporation fees will be less than 30$ if you incorporate in, say Kansas.

Easiest state to incorp in with the rules that are lax.

Yeah but FreeVPS isn't a multimillion dollar entity that would potentially make a difference by incorporating in Delaware.

terrorgen

Here is a list of fees from each state:
https://www.wolterskluwer.com/en/solutions/bizfilings/who-we-serve/estimated-state-fees?compositeLink={CD979882-6C48-4B02-9864-D9331D5FE145}

FrankZ

Another advantage of registering as a 501(c)(3) nonprofit in the US would be that US companies that donate servers to FreeVPS.org should be able to get a charitable contribution deduction for the normal price of the servers they donate.
I'm not an US accountant, but just saying it might be an added advantage you could look into.

Ympker

I understand the idea of limiting legal liability to a corporation rather than individuals, as free services are prone to all kinds of abuse. Yet, you will need to make sure to know exactly what this is going to cost you on a recurring basis.

Good luck!

xleet

I don't even use FreeVPS. I am pledging US$20 to encourage and reward @Not_Oles for the many good things that he does.

Not_Oles

@xleet said:
I don't even use FreeVPS. I am pledging US$20 to encourage and reward @Not_Oles for the many good things that he does.

Awesome!

Not_Oles

@Not_Oles said:

@xleet said:
I don't even use FreeVPS. I am pledging US$20 to encourage and reward @Not_Oles for the many good things that he does.

Awesome!

Nah! Beyond awesome! Truly xleet!

Encoders

@xleet said:
I don't even use FreeVPS. I am pledging US$20 to encourage and reward @Not_Oles for the many good things that he does.

I only ever run a thing in metalvps few years back, if this still need fund I'll pledge for $7

let's see if this project can survive just like SDF / freeshell

legendary

So, incorping something helps to avoid liability for accidental cp hosting? How so?

terrorgen

incorporating established a separate "person" in the eyes of the law. This "person" will be entering into contracts and place their names into services etc. instead of the actual biological person. In this way, it also provides some level of privacy.

Btw, this is how the super riches hide their assets .

So when (not if) there are legal troubles, that separate "person" will be taking the liability, not the biological person, although the biological person is still going to manage the headache behind the scenes.

legendary

@terrorgen said: So when (not if) there are legal troubles, that separate "person" will be taking the liability, not the biological person, although the biological person is still going to manage the headache behind the scenes.

So strange. If sh*t hits the fan, than company goes belly up and bullets avoided? What a concept

Not_Oles

@Encoders said:

@xleet said:
I don't even use FreeVPS. I am pledging US$20 to encourage and reward @Not_Oles for the many good things that he does.

I only ever run a thing in metalvps few years back, if this still need fund I'll pledge for $7

let's see if this project can survive just like SDF / freeshell

Thanks @Encoders! Super awesome!

$160 - ($40 + $16 + $20 + $7) = $77 to go. Who else is in?

Thanks guys!

terrorgen

@legendary said:

@terrorgen said: So when (not if) there are legal troubles, that separate "person" will be taking the liability, not the biological person, although the biological person is still going to manage the headache behind the scenes.

So strange. If sh*t hits the fan, than company goes belly up and bullets avoided? What a concept

Getting into business is a huge risk, and you'll need some protection from that risk to encourage a good competitive environment.

Of course, it will go another way. That's how deadpooled providers are able to pull it off.

But, this benefits more businesses (and people) than people who abuses this. Most countries have this kind of arrangement.

yoursunny

@legendary said:
So strange. If sh*t hits the fan, than company goes belly up and bullets avoided? What a concept

How to commit bank heist as a company?
Asking for a friend.

legendary

@yoursunny said:

@legendary said:
So strange. If sh*t hits the fan, than company goes belly up and bullets avoided? What a concept

How to commit bank heist as a company?
Asking for a friend.

Well, you rob the bank and go to jail. Friend goes to bahamas and drinks negroni or white russian while shuffling dollars.

terrorgen

@yoursunny said:

@legendary said:
So strange. If sh*t hits the fan, than company goes belly up and bullets avoided? What a concept

How to commit bank heist as a company?
Asking for a friend.

Put together a beautiful business proposal with bunch of technical jargons nobody truly understands but somehow made it to mainstream (e.g. cryptocurrency, meta universe, AI + something, ...), promising lucrative incomes in the future, ask for huge sums of loans.

Then disappear.

bdl

@yoursunny said:

@legendary said:
So strange. If sh*t hits the fan, than company goes belly up and bullets avoided? What a concept

How to commit bank heist as a company?
Asking for a friend.

Play lots of GTA

Not_Oles

@Not_Oles said:

$160 - ($40 + $16 + $20 + $7) = $77 to go.

Who else is in?

Thanks guys!

Dupondt

Delaware is very popular with medium/large companies. For very small companies, where even a few hundred USD can make a big difference, I'd be cautious about picking that state. Especially if you're looking at S or C Corp. The flat fees can eat up a lot of the budget.

An LLC formed in for example Wyoming is cheaper and you can get cheap/free banking with Mercury or Wise, to ensure the company has its own treasury. Don't mix personal and company money.

I'm not an attorney but I work on things like these a lot. Happy to answer any questions. Feel free to DM if you want to keep it private. All pro bono.

hostEONS

@Dupondt said:
Delaware is very popular with medium/large companies. For very small companies, where even a few hundred USD can make a big difference, I'd be cautious about picking that state. Especially if you're looking at S or C Corp. The flat fees can eat up a lot of the budget.

An LLC formed in for example Wyoming is cheaper and you can get cheap/free banking with Mercury or Wise, to ensure the company has its own treasury. Don't mix personal and company money.

I'm not an attorney but I work on things like these a lot. Happy to answer any questions. Feel free to DM if you want to keep it private. All pro bono.

from what I remember LLC passes on the profit/taxes to the owners of LLC, so if by any chance FreeVPS makes profit you will need to include it in your personal income tax but you save hassle of Corporate Tax that you need to pay with C Corp

I may be wrong as had a US company almost 6 years ago, but this is what I remember

Delaware tax is I think under $150 ?

bdl

Dupondt

from what I remember LLC passes on the profit/taxes to the owners of LLC, so if by any chance FreeVPS makes profit you will need to include it in your personal income tax but you save hassle of Corporate Tax that you need to pay with C Corp

I may be wrong as had a US company almost 6 years ago, but this is what I remember

It's correct that LLCs are usually pass-through. You can elect to have them taxed as a C Corp, though. But AFAIK, most are pass-through.

Picking between LLC, S Corp, and C Corp is one of the first choices to make. They all have their own quirks and intricacies. LLCs are the easiest to run and operate, but C Corp is a better fit in many cases.

Delaware tax is I think under $150 ?

$50 filing fee and $175 franchise tax (higher depending on how many shares you issue).

IIRC, Wyoming is just $60 (it goes up for large businesses).

Even cheaper options exist. I mentioned Wyoming because it's having a resurgence as an alternative to Delaware (and Nevada).

These differences don't matter for most businesses, but the scope here seems to be extremely tight-budgeted. Figured it was worth bringing up.

terrorgen

FreeVPS should also be applying for a non-profit status with the IRS. You won't be passing through any profits to the person while filing income taxes. Any surplus within the organization stays with the organization.

Based on https://www.wolterskluwer.com/en/solutions/bizfilings/who-we-serve/estimated-state-fees?compositeLink={CD979882-6C48-4B02-9864-D9331D5FE145}, Kansas, Iowa, Montana, and Michigan are the cheapest states for a non-profit.