BIG TOPIC: Consensus Press' LEGAL Structure

In tandem with the discussion about what we'd like to see from Consensus Press after Sinuhe there is the very important decision of how C.P. should be LEGALLY organized.

Background: At the moment, C.P. has no legal organization and thus exists in financial limbo. To make a long story short, I stepped in this time and covered things. Basically, I let the volunteers use my social security number and dealt with the 1099-K and paid the taxes and did the deductions. I am not volunteering to do so again!!

It seems to me that there are two realistic options for what C.P. can be:

1. A registered not-for-profit (maybe a 501c7?).

i. This will require registration in a particular state and somebody to oversee this process. Not an easy process, but not impossible.

ii. It will require a standing board of directors and regular reporting.

https://www.irs.gov/charities-non-profits/other-non-profits/social-clubs

2. A proprietorship (DBA)

i. Somebody is the legal owner of Consensus Press.

ii. That person receives and holds all funds, deals with the IRS, etc.

We could also register as a Corporation or LLC though, fundamentally, the issue of C.P. funds being taxes remains.

3. Alternative: No legal structure and process for taking bids on the elected proposal

i. Once the members elect a proposal, that proposal is open to bids from any press, group, or individual entrepreneur.

ii. The members select a winning bid, and pay the bidder directly.

(I'm condensing a long rambling thought train from last night.)

BIDDING SYSTEM IDEA

Here's a way we can avoid needing a legal structure and possibly solve some of C.P.'s other problems as well:

What if the winning proposal was open to bids?

(1) The Consensus Press process results in an elected proposal, exactly as we did before. That only takes a couple of months.

(2) Then, C.P. is open to bids on that elected proposal. Bidders could be presses will full capacity to do the project from start to finish – e.g. Thornwillow, Arion, No Reply, Greenboathouse, Corvus Works. Or bidders could be individuals who have a plan to make the proposal happen, by subcontracting the work out. Or bidders could be groups of craftspeople – e.g. Hand & Eye and Ludlow, Max Koch and Alanna Simenson. Each bid would include a per copy price, a timeline, as much of a detailed plan as the bidder wants, revisions to the elected proposal.

(3) The membership elects a bid, each member voting based on what they value.

(4) The members pay the winning bidder directly.

Benefits:

i. There's no need to establish a legal structure of any kind, because nobody at C.P. is handling the money. Further, with the international membership of C.P., there's no need to establish a legal "home country".

ii. Accountability is built into the system. Just as with any contracted work, the winner bidder is expected to uphold the terms of their bid.

iii. A financial cushion is built into the system. The winning bidder obviously will stand to profit – they wouldn't give a bid where they didn't – but they also take on the risks associated with production.

iv. This potentially fosters a greater variety of options for the membership.

v. There are checks and balances built in. If an elected proposal is unreasonable to pursue, nobody will bid on it. If parts of an elected proposal need changing to be doable, bids will include those changes.

Consider this play-through:

The members elect a proposal: "The Book of Ecclesiastes. Folio size. Comic Sans. Handmade paper. Hot pink leather binding." The proposal is sent out far and wide, and is open to bids. We receive six bids:

Thornwillow says:
– $500 each
– One year delivery timeline
– Printed on a Heidelberg
– Smythe sewn but hand-bound
– Mohawk instead of handmade paper

No Reply says:
– $700 each
– One year delivery timeline
– Printed on a Vandercook
– Entirely hand-bound
– Hand-painted hot pink paper instead of leather
– Awagami handmade paper

Greenboathouse says:
– $500 each
– Two year delivery timeline
– Type cast in-house
– Printed on a Vandercook
– Refuse to use Comic Sans – let's do Deepdene
– Refuse to use hot pink leather – let's do a tasteful Khadi
– Khadi handmade paper

Hand & Eye and Ludlow say:
– $500 each
– One year delivery timeline
– Printed on a Heidelberg
– Smyth sewn but hand-bound
– Munken instead of handmade paper

Paul Suntup says:
– $400 each
– Nine month delivery timeline
– Exactly as proposed
– He'll subcontract the craftspeople as needed, no details yet

Mr. Business Guy says:
– $300 each
– Six month delivery timeline
– Exactly as proposed
– He'll subcontract the craftspeople as needed, no details yet

Members can assess these bids and vote according to what they value. No Reply won't do the leather, but will use a handmade paper – Thornwillow will do the leather, but won't use handmade paper. Mr. Business Guy is offering a cheaper and quicker bid than Paul Suntup, but Paul is known and trusted entity. Etc.

Ultimately, the members elect Hand & Eye and Ludlow as a consensus choice. Each member sends their payment directly to Hand & Eye and Ludlow, and then we can follow along as they make our book.

Potential issues:

i. The members need to be committed to ordering the book regardless of which bid is elected. It's a Catch-22, because the bids are made with the understanding that a certain number of orders will be placed, but it's possible that not every member will follow-through with every bid. Perhaps the way to solve this is not to ask, "What's your favorite bid?" or "Rank the bids." Rather, "Which of these bids is acceptable to you?" We could even set a threshold. If no bid is acceptable to more than 80 percent of the membership, then no bid is accepted. If multiple bids are acceptable to more than 80 percent of the membership, then there's a direct election between them. That sort of thing.

ii. I also believe that C.P. should have a paid manager to run things smoothly. This "Bidding System" doesn't address that. Perhaps, though, the manager is as simple as: Members pay ~$40 dues at the outset of each new edition, which are paid directly to the manager.

iii. Will we get bids? My hunch is yes. I think there are plenty of presses and entrepreneurs out there would absolutely bid on C.P.'s elected proposals. After all, the membership is basically guaranteeing a big chunk of sales. And bidders can price it at whatever is worthwhile to them.

>4 grifgon:
Excellent ideas. Now go to bed and sleep on it and come back tomorrow with more refinements.

>3 grifgon: I like this idea. This would circumvent any official legal status (which would also involve choosing a country on whose laws to base such an entity). The presses themselves could subcontract, e.g. Hand and Eye could print the books and subcontract Ludlows for binding. They already have a shop so the book could be listed there and paid for directly to them, so no one has to collect the money.

Regarding the bidding process. I don't think that will be too much of commitment problem. If the title selction and rough specs are decided I don't think there are that many deal breakers in place. E.g. if I would like hand made paper, but mould made were selected I don't think most peoople would budge at that. If we do ranked choice voting you could set a limit. Like if we get 5 bids only and you have ranked the winning bid at 5 you don't have to participate.

Regarding the legal structure I think also depends on the country it is based on. For another project with 30 people (I knew some of them personally, but not all) we founded a Gesellschaft bürgerlichen Rechts (partnership under civil law) and once the project was closed (10 years later) we dissolved it. I was not the "manager" but it seemed to be really straight forward.

>4 grifgon: I really like this idea, too. Sounds like a sensible but also simple system, and anything that limits legal structuring gets my vote.

If we can manage something along the lines suggested by >4 grifgon: I would prefer that over any legal structure.

I really think we would need to reach out to a bunch of press proprietors if this is something that they would actually be interested in. I imagine adding a private Consensus Press book to a publisher's public store would probably add a lot of complexity to the operations & management of most presses?

The big benefit is offloading the production risks to the presses themselves.

@grifgon - since I know you have worked with other Hand & Eye to print projects for you, can you speak to what that process was like? How did you select them? Did you give them a project and a budget? Did you make suggestions and they give you a bid for the bill? I guess this would be different in that we would need the printers to run the show / buy the paper / find a binder / ship the books etc. versus NRP doing that work?

To me, it still sounds like there would be a lot of benefit to converting the press into a not-for-profit or proprietorship, but I don't know much about how those actually work.

>1 grifgon: A quick note for now: another business structure that could be considered is the Limited Liability Company (LLC). I am very familiar with these and have helped several of our tax clients set one up as well as having converted our own tax business from a sole proprietorship to an LLC. And yes, that means I've done tax filings for them as well.

>10 Glacierman: Isn't the benefit of an LLC the liability shield and the ease of pass-through income to owner(s)? Do these help us? The fundamental issue of a business structure – that C.P. funds will be taxed – remains the same. If the person in charge uses accrual accounting and our contracts are made in the same year as member payments, then I don't think it's a huge issue. But somebody will need to be the legal owner of C.P., responsible for its tax filings, etc.

>9 921Jack: "I imagine adding a private Consensus Press book to a publisher's public store would probably add a lot of complexity to the operations & management of most presses?" Depending on the bidder, I think they could manage the intake of orders however is best from them. They can send out invoices, set up a private link on their store – whatever. I don't think it would be a particular hassle to handle 70+ individual payments from members.

> "I guess this would be different in that we would need the printers to run the show / buy the paper / find a binder / ship the books etc. versus NRP doing that work?" Yeah, I think it's quite a bit different. The bidder would bid on the entire project, as opposed to a part of it. Working with, say, Hand & Eye is super easy. You tell Phil what you want, and gives you a price, you pay him. But that's just one part (a huge part!) of a fairly complex process. The key here is that the bidder (whether it be a press or an individual) bids on accomplishing the entire thing.

>11 grifgon: I'm probably oversimplifying things, but as far as the tax issue goes, whether CP is a non-profit / LLC / sole-proprietorship etc., we shouldn't be worried about paying taxes as long as the press is not taking a profit.

Am I missing something on why that is a concern? Or is it just the logistics of filing taxes that we're talking about?

>12 NathanOv: In the long run, yes, if there's no profit there are no taxes. Mostly we're talking about the logistics of filing taxes.

However, depending on the accounting method of the legal owner, it does get a bit tricky.

For example, I use cash accounting, which means revenues and expenses are reported when cash changes hands. So, for Sinuhe, ~$20,000 of orders came into the press' PayPal under my social security in 2023. PayPal sent me a 1099-K to report the revenue. The expenses which offset that revenue – mainly payments to Velke Losiny, Mark Askam, Max Koch, Alanna Simenson, and shipping expenses – are going to be reported across 2023, 2024, 2025. So, in the long run, no profit and thus no taxes. But, in the short term, I did pay taxes on C.P.'s revenue.

This is a bit easier if the legal owner uses accrual accounting, where revenues and expenses are reported when contracted. But there will also be some expenses – like shipping or unforeseen odds and ends – which are ad hoc and thus can't be expensed at the time the revenue comes in.

>11 grifgon: Isn't the benefit of an LLC the liability shield and the ease of pass-through income to owner(s)? Do these help us? The fundamental issue of a business structure – that C.P. funds will be taxed – remains the same. If the person in charge uses accrual accounting and our contracts are made in the same year as member payments, then I don't think it's a huge issue. But somebody will need to be the legal owner of C.P., responsible for its tax filings, etc.

The LLC itself doesn't pay taxes; the members pay taxes on their share of any profits allocated to them.

There are some complexities to LLCs which may not make that structure suitable in this particular instance, primarily centering around a changing membership. If a more detailed explanation is desired, I can provide one readily enough.

>14 Glacierman: "The LLC itself doesn't pay taxes; the members pay taxes on their share of any profits allocated to them."

So, how would that work for a US-based LLC with several non-US residents?

>15 Dr.Fiddy: I imagine only a small number of members / folks in charge of actually making the book happen would need to be a part of whatever legal structure is put in place. E.g. I don't think we would need non-US residents to be a part of the LLC or whatever is used.

>16 921Jack: That's the simplest way to go. The staff, who would be LLC members (= owners), would manage the company. Those who are currently members of CP would become customers who purchase a product from the LLC under whatever terms are decided upon. Of course, the title selection would be as already established including whatever tweaks we want.

One thing to note is that member/owners of the LLC have to contribute capital, services or both to the LLC in exchange for their membership. There are various ways of doing this, but I won't go into that level of detail at this point. Of course, ownership comes with the right to a share of whatever profits there might be. The LLC should, of course, retain some profits as operating capital. In fact, Montana LLC law requires that an LLC operating in the state maintain a positive bank balance at all times.

I should at this point out that although profits are ALLOCATED to member/owners annually, the company is not required to DISTRIBUTE those profits, which means that each member/owner is liable for taxes on their ALLOCATION each year (reported on a schedule K-1). This also means that DISTRIBUTED funds have already been taxed. Allocated, but un-distributed profits remain with the company and accrue to the member/owner.

The company can be operated to keep profitability minimal w/o jeopardizing operational capital.

LLCs operate with either a managing member or a paid manager, whichever the founding members choose.

>3 grifgon: This gets my vote for simplicity and lack of legal encumbrance. However, some of this is because I'm innately shy of such systems, so if someone else here is more comfortable with them (like @Glacierman) and willing to steer the ship through those waters, I'll not cavil.

All the same, I love the idea of farming it out for bids. We could in theory get a different press each time and a very appealing variety of titles ultimately.

I do however refuse to back any bidder other than Greenboathouse in your hypothetical proposal listed here. Deepdene ❤️

I think the bidding for the book would resolve all these legal issues. >13 grifgon: Have you spoken to any press proprietors to see if they would be interested in this?

I also think opening this up for bidding from presses each time is the most elegant solution--let those who're in the business figure it out. That said, if that doesn't work out, having someone nominally "own" each project for tax purposes doesn't seem that bad to me. Granted, I am somewhat unfamiliar with US business tax law, but as a business owner in Japan, I wouldn't have a huge issue adding the revenue and associated expenses to my books for a small project like a Consensus Press project. Aside from keeping track of receipts, it just wouldn't affect the business tax-wise all that much if the profit margin is as nonexistent as I think it is.

>19 c_schelle: I haven't. My hunch is that presses would be interested in bidding. I actually wonder if individual entrepreneurs would bid, too. There are plenty of people in the fine press ecosystem whose entire jobs are to project manage the production of books.

But there's really no saying unless we do it.

Curious for a straw poll just to gauge initial reaction to this possibility.

Here's the outline "bidding process":

i. Members elect a proposal.
ii. Producers are then invited to bid on the elected proposal.
iii. The members elect a bid.
iv. Payments are made directly to the winning bidder, who is then responsible for the production of the edition.

Question: Do we need to be concerned about the trademark/ownership of the Consensus Press name?

Good question. We might want to visit that.
Although registering a trademark can be very expensive.
We can, however, use the ™ sign w/o registering.

>22 grifgon: Wow, interesting to see such decisive support for this idea!

More before too long, but this is good. I think we're starting to hone in on some ideas that will improve C.P. for the second edition.

>22 grifgon: Payments are made directly to the winning bidder, who is then responsible for the production of the edition.

How does that work, if payments are not funneled through the press manager? Presumably, the bidder is not going to start work without some minimum number of payments. Does everyone have to pay before the work starts? If the minimum amount is not received in a certain amount of time, is the bid/contract cancelled or retracted and the money refunded?

>26 ultrarightist: I wonder whether bidders themselves might offer terms as part of their bid.

Or it could simply operate the same way that Sinuhe did. Sinuhe basically had a two step process for placing the "order": (1) indicate interest on a form, (2) pay the invoice that was sent. If I remember correctly there was something like a >90% follow-through rate.

I tend to think this "moment" is when new members should be admitted. Let's say we have 100 members and, after a proposal and producer have been selected, 12 don't follow-through to place orders. Then 12 new members might join at that point by ordering the edition, thus picking up the slack.

>27 grifgon: That's a logical entry point for new members. They pay the same as existing members, but didn't have a say in the proposal round, so it evens out in the wash.