Rumors about the LLC and Facts about the LLC

There have been a few rumors swirling around on the site and on IRC regarding the LLC and Sponge.

PLEASE NOTE:

When a Sponsor contributes money to The LLC (OpenSponge Foundation, L.L.C, DBA “Sponge Powered”) that means money is deposited into an account controlled by the LLC, not the SpongePowered “Open Source Project”.

SpongePowered, (the OSS project) is merely a presence on GitHub, etc…

When a Person donates to the LLC (OpenSponge Foundation, L.L.C., DBA “Sponge Powered”) that means money is accepted (THANK YOU!) and deposited in the same account controlled by the LLC.

As one of the drivers to make this happen and one with intimate knowledge of the issue I will try to paint the picture of what is actually happening and what is the end goal of the effort.

Sponge is and for the foreseeable future will be a open source project. The license text in each source code file makes this clear.

The copyright to the source code is also clearly marked and SpongePowered and the contributors are the stakeholders in the source and the open source project.

The LLC does not change that fact in the slightest.

So, in order to explain what has happened and what the end goal is, let me convey that in the form of rhetorical FAQ question and answer style.

SpongePowered LLC FAQ

1.What is an LLC? An LLC is an acronym that stands for Limited Liability Company. An LLC is not a corporation. The Limited Liability function of the construct gives the directors of the LLC protection from certain forms of liability. It allows the LLC to operate as a company, and the company may own assets and property that are within the operations of the company. Even though the LLC is a Company, in the filings with the IRS, the LLC is taxed as a C-Corporation. This means that the LLC is taxed not the Partners (owners) of the LLC.

2.Does SpongePowered already have an LLC formed? Yes. The LLC was created on February 6th, 2015 and is an official entity, established in the home state of one of the project leaders of SpongePowered. The Trade Name “SpongePowered” has been established in that state so that the LLC can DBA (Do Business As) under the name “SpongePowered”. The official URL of the LLC is http://spongepowered-foundation.org

3.Who owns the LLC? Currently the LLC is owned legally by one person, sibomots. The LLC governing documents and charter will establish the Partners of the LLC who are closely involved in the project. At this time of writing the three Partners of the LLC are sibomots, Zidane and Owexz. Partners are persons who have legally executed their signature under agreements and the signatures notarized by duly recognized Notary Public. The agreement thus signed is part of the founding papers of the LLC. When these documents have been executed the legal owners will be sibomots, Zidane, and Owexz initially.

4.Can anyone become a Partner of the LLC? First, the requirement of being a Partner is that you are over the age of 18. Second is that you are understood and recognized by the project leaders to represent the project’s LLC endeavours. Those individuals have been sought out already and they will be the initial Partners of the LLC. The LLC is a legal binding agreement among persons (Partners) and this also involves being responsible for personal income tax filing requirements and other non-trivial obligations. It’s not a step to be taken lightly, nor is it a role that can be handed around like trading cards. The label of Partner is required for the legal agreement formed when the LLC is formed. The bank requires there be a field agreement signed and executed before the account is created. That is a formality. For “Partners-at-large” the Partners are deciding that we have the need to name Partners-at-large for recognizing excellent and utterly amazing support given to the cause so far.

5.OK, So I understand all that. What will the LLC actually do? The LLC’s primary function is to be the legal owner of a bank account into which all donations to SpongePowered will collect. When a donation is made (not tax deductible) the funds will accumulate first into a specially designed paypal.com account. Once per month those funds will be transferred into the bank account owned by the LLC. Quarterly the statements of assets and liabilities of the LLC will be reported to the community. The other duties of the LLC are as follows:

Create and maintain the web site:

http://spongepowered-foundation.org

Promote the Sponge Project and provide support and financial help

to the Project where needed.

Spend money to help send developers to conventions and conferences

where Sponge can be shown, demonstrated and improved by access with

the general public, conference attendees and sponsors.

Create as needed special committees (groups) of contributors who

will work on projects as directed for the expressed purpose to

support Sponge, the LLC and the promotion of whatever is required to

operate. Example - the group to design and maintain the graphic logo

and design of our messaging to the public.

Finally, let be absolutely clear: The LLC does not and will not

ever own Sponge. LLC has no interest in owning Sponge, owning the

domain name, owning the Intellectual Property or patents, or any

other “asset” that is produced by the ongoing public contributions to

the code base and project as a whole except when the assets are part

of the operational duties of the LLC. Eg., the money collected by

donations is owned by the LLC, and the name of the organization is a

Trade Name owned by the LLC, but that is generally the water’s edge

of the LLC and Sponge Project border.

6.How do I get on a committee? You will be approached. Or, you can approach the Partners. You can express your interest to forming a committee and being part of that work with any of the team leaders or Partners of the LLC. The primary goal of selecting Partners is age, and maturity to handle the on-the-ground problems of interacting with the public and relations with the non-signed stakeholders of Sponge. Please talk with a Partner to discuss this.

7.Does this mean that Sponge has “gone commercial” ? No. Again, Sponge is an open source project and whatever happens in that domain is separate and distinct from the LLC. The LLC can be thought of as the focal point for the worlds greatest SpongePowered fan-club. The LLC does not direct any technical decisions of the Project, although the LLC will offer advice and counsel to the project directly and indirectly with the expressed purpose to make the project better for users and developers.

8.It sounds like this is really just about money? Well, in fact it is about money because that is one of the main functions of the LLC – to collect and distribute funds for the support of Sponge Project. The LLC must be the focal point where donations are collected, and not any individual person. That is by design to protect any individual from responsibility that may arise if there were legal issues confronted. Eg., if the LLC owned Sponge then the LLC would be party to lawsuits against Sponge. Without owning Sponge, the project survives intact as an open source project. The LLC is taxed as a C-Corp entity which means that the individual Partners do not pay their proportional share of tax based on the income of the LLC. The LLC pays it’s own taxes.

9.So, what about the DMCA issue? So there’s no way a DMCA style takedown notice can apply to Sponge? Any person can issue a DMCA takedown on any party at any time. It is up to the courts to decide the merit of such an action. The LLC cannot prevent the DMCA takedown notice regardless if Sponge was owned by the LLC. But the key stakeholders of Sponge have established a process whereby the source code is always licensed under the MIT License, and also are taking great care to ensure that no third party code or software is ever shipped with Sponge (Eg., we don’t “Ship” with Minecraft bits, nor do we “ship” with Forge bits, etc…). If future agreements change those factors, then those agreements would indemnify Sponge as the case may be. At this time of writing Sponge is entirely free, open and unconstrained by risk of take-down from third parties due to the way the code is written, packaged, and deployed. On the other hand if the LLC did have the surplus of funds to mount a defense it would be up to the Partners of the LLC to rally those resources to the aid of Sponge.

10.Let’s say that Sponge does get a DMCA take-down from a disgruntled contributor, what is the LLC role in that? Unfortunately, the role of the LLC is observer in those situations. The LLC is not chartered or funded to provide assistance to the legal challenges made against Sponge because (again) the LLC does not own Sponge. The truth of the matter is that Sponge technically is owned by those persons who support and maintain the capabilities to host the code base and the domain under which the project itself exists. While it would be unfortunate if a takedown occurs, the challenge would need to be tested in court and by all accounts and reasonable analysis of the code base it should be self-evident that the code is free of any third party copyrighted code to allow those claims to prevail.

11.Huh? Answer: Don’t worry about it. Sponge is designed from inside-out to be virtually immune to the sort of DCMA issues that have fallen on other projects. If the Sponge Project is ever party to a DMCA take-down we have a bigger problem. But, from all reasonable messaging received by individuals who have researched this, the risk is low. As low as any risk present for Forge itself, or any of the thousands of modders and plugin developers in the world.

12.So, I’m confused. How does the LLC actually benefit us, how does it benefit me the user of Sponge, me the developer of Sponge? The LLC provides excessive benefits to Sponge by being the caretaker of all donations made in name to the Sponge project and disperses those funds to give assistance to Sponge operations, and assistance to third parties (like Forge) onto which so much of Sponge’s success is based. The material and promotional support of Sponge through marketing, advertising, promotion, and organized communication will and should make Sponge more visible to the community as a whole. If nothing else, that helps everyone involved with Sponge now and in the future because support grows the user base. A growth in user base means more Plugins. More servers using Sponge and more Plugins chasing those servers and more players chasing those Servers is the essence of the positive feedback loop one finds in any “Network Effect”.

13.OK I’m mostly convinced this is a good thing, but I really just want to code/use Sponge without the commercial side of things clouding up the real true motives of Sponge. How does the LLC help do that then? It helps do that because the LLC stands out of the way of the progress of Sponge. Again, the LLC does not direct technical decisions of Sponge in anyway. The key minds behind developing Sponge can and should carry out their personal interest in Sponge the way they have in the past. Nothing changes that condition. If a person doesn’t care for the “commercialization” of a Minecraft plugin engine, then that person should ignore the LLC. By doing that you will feel no pain and suffer no consequences.

14. Wait, I didn’t say that I want to shun the LLC, I do still want to support Sponge! I cannot code, but I play sponge and I want to help Sponge somehow. How do I do that? You continue to do what you’ve been doing – you play Sponge based servers. You tell your friends about Sponge based servers. You contribute directly to Plugin developers who are making the Sponge plugin ecosystem richer and vaster. You also may choose to donate money to the LLC. For the reasons and rationale explained above it should be clear why that is a good idea.

15. OK Fine, so how does one actually donate to Sponge today? I don’t see a single thing on the official web site about donations. The reason why you don’t see any links or websites or messaging about the LLC or donations is because those web site documents are not yet finished. There are two things that must happen first: One, the http://spongepowered-foundation.org site needs to be finished. Two, the links to the “Donate” function need to be added to both the http://spongepowered.org and http://spongepowered-foundation.org web sites.

16.Do I need to wait for the web sites to be updated to donate? No, you can donate today right now by sending funds to donate@spongepowered-foundation.org

17.Do you take payment from Credit Cards? Yes. The paypal link and address mentioned will allow credit/debit card payments. Thank you very much.

18. Can I send a check or cash money? No. There is no address to which to send those contributions in the form of cash or check.

19. Can I donate if I’m under 18? You better ask your parents. We would rather not receive donations from minors, but if your parents are willing to help you do this, there’s nothing wrong with that. Just make sure you are doing so with their permission.

20. Are donations tax-deductible? No. You cannot deduct from your taxes any contributions to the LLC.

21. Why not? We’re not a Non-Profit for Tax reasons. The application process to become a non-profit entity is long and expensive. Plus, being a non-profit would tie the LLC down into a narrower channel of activities than we wish to pursue.

22. Can we become a non-profit? No. It simply will not happen. The LLC cannot afford the legal costs to form a non-profit, and it also ties the hands of the LLC to pursue sponsorship and partnerships that may arise for the benefit of the Project. In a word, it’s a headache.

23. I am a potential sponsor, and I want to invest in Sponge, how can I do that? First, contact the LLC Partners and we can discuss it. In general sponsors can help Sponge by providing services and software support (eg., Hosting services, or providing Software Licenses to development utilities, and the like). Beyond that there are certain assets of Sponge that would require an agreement if those assets were licensed for use by sponsors.

24. If my firm does choose to sponsor Sponge and go through the LLC to do it, doesn’t that mean my support is in vain since the LLC is not the legal owner of the Sponge project? No, since the ownership of Sponge is by virtue of the support given to the online repository of the source code, and nothing more, there is no true owner of the Sponge codebase. There are key developers who own the right to direct development and they choose how that route is taken. But financially speaking the Sponge project has no “in-box”. The “in-box” is at the LLC. Contact the Partners of the LLC to discuss sponsorship. Sponsorship helps Sponge because it provides resources that would be expensive for Sponge to acquire on its own. Use the LLC channels for those projects, please.

25. Does the LLC actually want sponsorship? Yes. The saying is “make hay while the sun shines.” Right now the sun is shining. The other rule is you always strive to make money when you need it the least. But, we actually need money to do some extra legal work but the costs are low and once those are solved we will be able to direct all the funds towards the efforts mentioned above.

26. Uh, what legal “work” ? The work that is needed is to put in the final protections of the brand and name of SpongePowered into the records. Trade-names, marks and the like are filed with the Federal (US) Government and those cost money. Plus there needs to be a professional to overlook the actual charter and governing documents so that the Partners who do sign do so with some form of confidence that this is being done correctly. Any lay person can do all of these things, but the better route to take is to have them at least reviewed by a professional. The cost of doing that is between 2 and 4 thousand dollars. The basics are covered now, but there are some tasks that still need to be completed.

27. So, I’m donating money to help form an LLC? I thought I was helping support Sponge? You are supporting Sponge. These efforts take time and resources to complete. Conservatively speaking the amount of income from donations to use to benefit the developers, projects (like Forge, for example), will far exceed whatever the costs may be. Sponge has tremendous appeal among developers and users.

28.I am not interested in the mumbo jumbo about LLC and sponsors and donating, I just want to buy a tee-shirt. When can I get a tee-shirt? Soon. The LLC will be designing a committee around making those promotional materials available soon. The last remaining issues have to do with the final selection of a logo that is appropriate for the merchandise that would be sold to the public. We will try to come up with a slate of offers that would appeal to every supporter.

29. I heard about “Plushies”, what was that about? It was an idea for a toy with a special relationship to Sponge based on the identity of one of the members of the community. There will be a “Plushie” (actually a set) created, as well as all sorts of “swag” that will be trivial merchandise that will allow you to express your interest in Sponge in the same way you wear branded clothing or use branded accessories in your life.

30. I’m confused why all of this came out of the Blue? It didn’t but we can understand why that feeling may be present. The goal overall is to support Sponge, and the LLC is the legal and correct mechanism to ensure that support can be facilitated between the general public and the whole Organization. Plans to this end have been debated, argued, and discussed for months. It is now where we need to nail down some remaining issues that are important for this to all come off smoothly.

31.Sounds cute, but let’s get back to the nitty gritty – who actually controls Sponge and what is the relationship between that “ownership” and the LLC? The Sponge Project itself has three leaders: blood, sk89q and Zidane. They call the shots with respect to Sponge, the Project. It is up to consenting adults to decide how that trio will approach the LLC. In order to lend credible standing to the LLC, Zidane and sibomots are permanent Partners of the LLC and with the advice and counsel of interested people like sibomots, Owexz, and others, this LLC will flourish to complement the production side of operations – the Sponge code base. Ultimately one person or a team of people will decide what goes into Sponge, and those leaders have already made that point carefully and correctly. At the same time, the leadership desires that the LLC be formed and that it’s goals are clearly stated to maintain an ‘arms length’ of separation so there is no confusion about what will happen to Sponge and the relationships with the community.

32.So more nitty gritty questions, about Partners. Are they liable for what Sponge does? No. They don’t have ownership in something to be liable for.

33.That doesn’t answer the question. Can a Partner ever be sued? Yes. Anyone can sue anyone else for any reason. The law doesn’t prevent that. Whether or not the case has any standing is up for a court to decide.

34.So, let’s say i’m under age (under 18) and I contribute to Sponge by developing code, am I affected by the LLC legally? No, but your legal guardians are, just in the same way if you hit a baseball through a neighbor’s window. You’re legal guardians are responsible for everything you do until you reach the age of 18. If you are under 18 and contribute to Sponge, you are doing so voluntarily and those things you contribute fall under the licensing terms of Sponge. Your code-wise contributions have no bearing or impact whatsoever with respect to the LLC.

35.So, let’s say I’m 18 or older and I contribute to Sponge by developing code, am I affected by the LLC legally? Yes, anyone can get sued for any reason. But logic and reason would suggest that you are not a target because your contribution is in the code base. The LLC has no legal ownership of the codebase.

36.This talk about liabilities and legal consequences has me rattled, why was this not explained up front? It wasn’t because it’s common knowledge. In reality it would not be an issue if we did not live in such a litigious society. Please just carry on and not worry about it.

37.OK, I think I understand now, so what should I do next? If you write software and have been contributing to the Sponge code base, continue to do so. If you want to get involved with the code base, there are several areas where your skill in Java software development may be useful. Contact a team leader on #spongedev with instructions on how to proceed. If you’re a player and want to support Sponge you have many options. One is to donate money, another is to spread the word about Sponge, and still another is donate money to third party Plugin developers. The more Plugins that are made ready for Sponge, the better. For those who want something in return for their donation the offer is this: Making Sponge better is the goal of everyone involved in the project. If the codebase and design are good, then more people will use it. If the organization has the right level of funding, then Sponge can attend conferences and conventions where Sponge can gain more notice fron the public. As a contributor to Sponge (code-wise, money-wise, or merely by being an enthusiastic user), then all of those efforts help in some way.