Permaculture Business Structures? For or Non Profit? Cooperatives?

Greetings from Jordan of Southbound Gardens in New Orleans!

I noticed that there is not a forum area for social permaculture per say, certainly not permaculture business startups and structuring, am I just looking in the wrong spot?  I do hear that Paul is the Permaculture Big Bucks guy after all...

Curious because in my PDC we talked about social permaculture, which included business structure.  Scott Pittman told us that Mollison took some cues from what the big corporations were doing - having for profit corporations with non-profit sister entities.  I thought he said that this allowed the non-profit to acquire assets such as land, tools, office space, and supplies free of tax, while the for-profit could use these things.  I must have gotten that backwards because I just did some research and that would appear to be illegal.  There are various benefits and draw backs to the different forms of either model, and there appears to be consensus that laws and tax code are far behind when it comes to serving the increasingly common social enterprises.

My business is an LLC.  The governing structure is very easy, my partner and I make decisions and act.  We are thus highly flexible, which is important for a permaculture business.  We set out selling food from urban gardens and plants from our nursery.  Then we started doing lots of workshops, then consultations, then offering school garden installations and teaching programs, and farm-to-table events, and the occasional permaculture installation.  This much diversity is stressful and spreads us thin, but it has been necessary to find out what works and what does not.  Also, certain aspects feed into others - examples:  we have plenty of nursery stock to supply our gardens, our gardens serve as workshop spaces, selling plants at farmer's markets is an opportunity to hand out fliers for our events, community discounts on plants helps us reach schools and nonprofits for installations and consultations, etc.

Given the work we do people often assume we are a nonprofit.  We have even missed donation opportunities when folks find out we are an LLC.  I would love to be able to accept tax deductible donations, especially as we prepare to move our greenhouse operation and set down roots in a long term permaculture education and garden center location.  A big fundraising campaign seems in order.  Reduced fees are available for a number of opportunities if you are a non-profit, and you are eligible for certain no-bid contracts.  So there are several advantages.  But a major drawback of the for/non-profit hybrid model is that you have to staff and run 2 different organizations, while being careful there is not too much overlap or any funny business in the financials.

Another great model is the worker owned cooperative.  I dream of having a permaculture co-op loosely based on the Mondragon Workers Coop in Spain.  But that may have to wait for another lifetime...  Here and now I am trying to have a permaculture community education/garden center.

So can we open up a conversation here?  What kind of businesses are other folks running?  What do you find works and does not work?  Any tips for start ups or established businesses who want to spread permaculture in their area and beyond?

Alright,
Jordan Bantuelle

For me, a for-profit status is required as without it I could not tap into the amazing resources of the USDA. They are not infallible I know, and I am not generally a Government Agency type of person, but they do regulate me as a farm anyway, and a for-profit farm status allows me opportunity to apply for low interest loans, obtain annual subsidies, and obtain grants.

I have received some charitable gifts; particularly over the winter as it was especially tough and I was in a major on-farm accident. But they were not tax-deductible gifts because this farm is non-profit. Now I must legally claim the income, yet the 35% taxes I will have to pay on that, is extremely small in comparison to what I have received in low interest loans, subsidies and grants. When I calculate in what the potential will be for the future as my farm grows, the choice is rather simple to make.

Ultimately my farm goal is not so much to make a lot of money; but rather return to others who have given so freely to us. My family has been given so much...from non-profits and individuals alike. I am thoroughly convinced that that this winter was so tough, not to make me question the intensity of my fortitude, but to show me that others are loving and caring. That point was not missed. I hope in the very near future my farm's profit will enable us to put our money where my mouth is. I really hope I am given that opportunity, and I hope I have enough character and moral standards to not get greedy.

I talked to a permaculture teacher and they said that many teachers do the hybrid model.  The non-profit promotes classes, and then hires the for-profit to teach.  My main question here was if there is any issue with the the same teacher getting hired every time without any bidding process, which is fairly common when non-profits are looking for paid services.  Apparently hasn't been an issue, though.

Often times a non-profit will own all of the assets, say tools, equipment, and such.  The for profit will then lease those things from the non-profit.  It is worth noting that if a non-profit dissolves, there is a relatively strict process for releasing the assets.  Usually they have to go to another non-profit.

Leasing can also happen the other way around, where the non-profit will lease all of the things they need from the for-profit.  Non-profits can buy things from the for-profit up to a certain amount.  The for-profit can also donate money to the non-profit, but usually only up to 10% of taxable income, as I understand it.  You can donate more, but past 10% it will not be tax-deductible.  The private owners are welcome to donate up to 50% of their income tax free.

So that is what I got!  I am by no means a lawyer or accountant, so if anyone in the crowd is, please check what I said and add to it as you see fit.

I am a lawyer, and... Jordan, I like what you've said so far.  And you might have a cooperative already!

What makes a business a worker cooperative?  1. The workers own it, 2. the workers control it (1 member = 1 vote), and 3. net income is split based on "patronage," which means the % of the work done by each worker-owner.

This is a bit simplified, there are ways for outside investors to play a role, with limited voting, etc.

So Jordan, if you and your partner have one vote each, and if you split income based on how much of the income each of you generated, then you may very well already have a worker cooperative.  In the US, worker co-ops are often structured as LLCs, often because of employment law, and also because cooperative corporation laws were designed for ag and consumer co-ops.