3731 Northwestern LLC Operating Agreement

I just read over the 3731 Northwestern LLC Operating Agreement draft that was drafted with the help of the Detroit Justice Center. @cryptogoth I didn’t see the document posted anywhere, but should I upload a copy to the Forum?

In any case, here are my questions/feedback:

  • It looks like all the voting power will be held by Detroit Arcology, but since this isn’t a single person, how would that work?

  • I’m confused about the tax category, I also thought it would make most sense to get taxed as a C-corporation. Is this not possible? I’m not really following the conversation in the comments with Whitney.

  • Regarding admitting new members or changing ownership percentages, are we planning to allow this or is the idea for this house LLC we will not? And if we allow admitting new members, would each Member’s vote be equal for a vote to admit new members?

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This is the draft from the DJC with changes suggested by our lawyer Whitley.

3731 Northwestern LLC Operating Agreement - Draft 2 3.pdf (233.9 KB)

After some discussion with some partners over the past few weeks, there is some concern about tax liability, especially with regards to new and future members from web3. I propose we conclude the 3731 LLC with the lawyers from Detroit Justice Center, where all proceeds beyond the initial acquisition cost be donated to non-profits and charities, with percentages determined by those that people have contributed to Detroit Arcology so far according to this table

(the column in black with white text). I’ll consult with our lawyers and also a certified public accountant to make public statements that this donation to non-profits creates zero liabilities, tax or otherwise, for anyone who chooses to exercise this choice by posting here in the forum. Participation is completely optional, and by default I propose that any unvoted proceeds go to the Detroit Black Farmers Land Fund.

Afterwards, I propose dissolving the existing Detroit Arcology LLC, which has never had any members, no operating agreement, and zero tax liabilities.

https://cofs.lara.state.mi.us/CorpWeb/CorpSearch/CorpSearchFormList.aspx?SEARCH_TYPE=3

In the most recent filing on February 2022, I am listed as the registered agent, which again carries with it no legal powers or liabilities other than conveying mail to the non-existent members.

https://cofs.lara.state.mi.us/CorpWeb/CorpSearch/CorpSearchViewPDF.aspx

1. The only personal liability a resident agent for a limited limited liability company assumes is that associated with timely transmission of a lawsuit summons and petition. If a resident agent is negligent in making a timely transfer, and the LLC suffers financial or otherwise because of that failing, the resident agent is responsible for any damages sustained by the LLC. In other words, if a judgment is entered against the LLC because it failed to timely respond to the lawsuit, the LLC can sue the resident agent for those damages.

Here are my personal responses to the questions above from @Adrian

  • It looks like all the voting power will be held by Detroit Arcology, but since this isn’t a single person, how would that work?

I propose to remove all voting power and ownership percentages in that contract. I will request if our lawyers, notary publics, a realtor, and/or an escrow company are willing to become the sole members, with only powers to authorize the sale of the house through a third-party realtor they choose, publish the proceeds here, repay the loan to myself of about $43,818 which I have taken the sole risk of purchasing and remodeling the house, and distribute the profits to a non-profit or charity according to the Ownership Table above. I will ask if that still qualifies us for pro bono work from DJC as well, as we originally approached them as a worker-owned cooperative, which we are not.

All other time, tools, and material that has been donated by myself and others, should be pro bono and unpaid. In a real sense, the DAO grant we received was not free; we paid for it with 3 years of experimentation, the most intense of which happened in the last 12 months.

  • I’m confused about the tax category, I also thought it would make most sense to get taxed as a C-corporation. Is this not possible? I’m not really following the conversation in the comments with Whitney.

It was always my intention to be taxed as a C corp for this or any other effort. Apologies if I didn’t make that clear, as I only recently understood enough about the tax code to see the advantages of C corps versus their “double taxation”. Electing to be taxed as a C corp is a simple form we file with the IRS that allows the LLC to pay taxes on retained earnings without creating any liabilities for any members, until they sell their shares / withdraw their balance, which again, I propose to remove the ability to do that. In any LLC that is taxed as a pass-through entity like partnerships and S corps, profits needs to be distributed in a timely way to pay for the liabilities they create for their members as well. This is not a problem that is unique to us.

  • Regarding admitting new members or changing ownership percentages, are we planning to allow this or is the idea for this house LLC we will not? And if we allow admitting new members, would each Member’s vote be equal for a vote to admit new members?

As mentioned above, I propose the only members be completely disinvested parties such as the lawyers themselves, notary publics, or an escrow company, such as the one that originally handled the sale of the house from @Dame to me. They will have no voting powers other than to approve the sale, after the title of the house has been transferred to them, and to read this forum to determine which charities to donate to.

The delay in writing this message while I was in Arizona was due to me being burned out, wanting to completely disconnect and not be contacted about this project during my time away, my father’s poor health, and general negative feelings about the approach of one individual taking extreme financial risk, a few others taking opportunity and sweat equity risk, and then asking others to come in afterwards and participate in democratic governance, and giving all parties equal voting power. Sorry for any stress this caused, it was not due to any other motive, and I see now it is time to end this experiment.

I regret this culture where we have focused on these issues of voting and ownership rather than renovating houses, and I take responsibility for the incentives I put in place that led to it. We’ll leave this forum up in perpetuity so hopefully others learn from our mistakes, and also what each of us is like to work with. Thanks for reading so far, as we wind it all down. As always, feedback is welcome, especially dissenting ones and real talk.