makesense, the backstory of our legal structure

  • Our legal history is still under construction! This is a continuous process and many current decisions will probably become mistakes to be corrected later.
  • This article does not constitute legal advice. It is a simple testimonial of what Leila Hoballah, in charge of the legal structuring of the ecosystem from 2011 to 2015, and myself, from 2015 onwards, have chosen and experienced ourselves.
  • The article doesn’t address certain parts of makesense’s history, as sometimes I chose to simplify the narrative for the sake of clarity — so there will be some imprecisions!
  • As most of the questions I receive concern the French legal framework, I don’t include the history of makesense’s legal structures abroad

So here’s another story of a movement, from a legal perspective!

Legal structures are always evolving. In 9 years of existence, our ecosystem has passed through numerous legal changes motivated by strategic questions related to our identity, our mission, our governance, our management, our activities and our funding sources.

2010, the creation of the association makesense — and makesense came to be

Back from his world tour, Christian Vanizette and Leïla Hoballah decide to throw themselves full-time into makesense — defined at the time as a project for social entrepreneurs and citizens. makesense was thus created under the French term Association Loi 1901 (or “non-profit-making organisation”) — in this case, of the “non-taxable” type — the first legal form for all volunteer activities supporting social entrepreneurs. It became possible to :

  • Register its brand
  • Sign contracts
  • Protect the developed methodologies
  • Receive donations
  • Make the first expenses (website development, office rental, operational expenses, etce)
  • Take an insurance policy

2011: creation of CommonsSense SAS — how to protect the social mission?

After a year of existence, more and more private companies asked us to provide paid consulting services. A great opportunity to fund our activities, explore new ways of tackling our objectives and professionalise our know-how. At the same time, those opportunities added two potential risks: 1/ drifting from our mission and 2/ damaging the legitimacy for our other activities.

  • Which legal entity owns the brand (and thus the immaterial value created)?
  • What is the overlap or alignment between our so-called ‘commercial activities’ and the purely non-profit actions?
  • What flows should there be between the legal entities?

2012–2014: multiplication of legal entities — beginning of the “makesense galaxy”

As a community of citizens and social entrepreneurs, makesense became agile, allowing individuals to add their own piece to the structure as a whole. In this way, entrepreneurs like myself became a part of the adventure by building and adding new components to the ecosystem. The critical question was: how to allow prototyping, testing and growing makesense without putting the original project (the mother organisation) in danger in case of failure?

  • Senseschool SAS for educational activities in partnership with schools, created by Marine Plossu et Caroline Delboy
  • makesense Room association for activities related to media and festivals, created by Vincent Hejduk (later closed)
  • Sensecube association for social entrepreneurship incubation and support activities, founded by Alizée Lozac’hmeur and Léa Zaslavsky
  • Social Media Squad cooperative for activities specific to social media, created by Marie Leborgne, Louis-Maris Certaines, Habib Belarib, and Romain Chanut
  • Independent in its operations, recruitment and team management.
  • Closely linked to the makesense ecosystem through a licensing contract which stipulates that the entity is permitted to use the brand “makesense” (and, at the time, “sense”) on the condition that, each year, 8% of its revenue (SASs) or of its budget (associations) is reverted to the makesense “mother” association.

Key questions at this stage:

  • Who owns the global brand? What is the “price” associated with its usage?
  • How to structure an organisation to allow for testing new activities without damaging the existing ones?
  • How can we clarify each individual’s role in the organization? (Who is legally responsible for what? Who has which legal mandate?)
  • How are the different entities independent? What are the legal links and agreements to put in place to create a sustainable ecosystem?
  • What legal and financial implications (risks and opportunities) have the established legal links between the different entities?

2015: taxing the association — the cost of success

Mid-2015, under the expert eye of our accountant Fabien Cassam (Orgaco — whom I strongly recommend), we realise that the licensing revenues received by the main makesense association, the famous 8%, turned out to constitute commercial revenue for the nonprofit. As this revenue exceeded 60,000 euros in 2015 (which is the limit amount of commercial revenues a non profit can receive in France), we decided to submit the organisation to taxation and begin declaring the income for tax purposes (a “taxable association”). With our growth, evolution of the legal framework became necessary. A model is good for a certain time, within a certain context, and is not absolute.

From 2016: simplification of the model into 4 complementary entities — the impact hybrid

The multiplication of legal entities since 2012 added a lot of complexity in terms of legal, fiscal and accounting management.. What was initially useful for prototyping new models quickly and efficiently became a constraint that slowed down the ecosystem’s legal operations and financial management. At the same time, certain activities spun off from the ecosystem or developed into other formats.

  • The makesense association for all activities on creating and animating citizen communities (“makesense for citizens”) -still being the “mother” association
  • An endowment fund to run philanthropic activities and receive donations (which President is the President of makesense association)
  • The Sensecube association to run incubation and social entrepreneurship support activities (“makesense for entrepreneurs”),
  • The CommonsSense SAS to run organisational transformation activities (“makesense for organisations”) whereby the capital is 100% owned and controlled by the makesense association.
  • How to make the best out of the specificities and complementarities of existing legal structure, especially when multiple funding sources?
  • How to organise our ecosystem in order to manage its growth and financial stability?
  • What are the power and financial dynamics between the different entities?

“makesense” as it is today.

Since then, we have been operating in France with these 4 entities.

To keep in mind?

As each organisation is different, it’s important to gather as much information and know how to ask the right questions at the right time in order to make responsible informed decisions. There is no “one-size-fits all” perfect solution, each case requiring different considerations.

  • What’s the identity, mission, and values of our organization and how can we keep them aligned and coherent?
  • How and for whom are we delivering impact?
  • What are my sources of funding today and tomorrow? What legal constraints do they imply?
  • What are the governance model / decision-making among my different activities ?
  • Who decides what and on what topics?

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makesense

makesense

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makesense est une communauté internationale de citoyens, d’entrepreneurs et d’organisations qui résolvent ensemble les défis sociaux et environnementaux