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ADR 0003 — Pre-formation handoff from current operating arrangement to the new 501©(6)

Status: Proposed Date: 2026-05-04 Decision-makers: Pre-formation working group; counsel for the new entity; pending Board ratification at incorporation

Context

Ganjier Guild has been operating prior to formal incorporation. During the pre-formation period, an existing legal entity (a single-member LLC owned by a member of the pre-formation working group) has hosted Guild operations as a DBA. That arrangement is temporary and exists so that the community could function — collect dues, run education, hold events — while the new 501©(6) is being designed, drafted, and filed.

At incorporation, the new 501©(6) becomes a separate legal entity with its own EIN, its own bank account, its own merchant relationships, and its own member contracts. The DBA arrangement ends. The Guild's members, credentials, software, domain, and operating cash all need to move from the host LLC into the new entity in a documented, defensible way.

This ADR records how that transition is to occur and what principles govern it. The financial and operational specifics (dollar amounts, account details, individual member records) live in working files outside this repository and in counsel's incorporation packet, not in this ADR.

Constraints and facts informing the decision

  1. The host LLC and the new 501©(6) are separate legal entities, even though one wholly precedes the other. There is no automatic continuity; every transferred element requires an act of assignment.
  2. Members signed up under the host LLC's terms. Their data, their consent, and their relationships are with that entity. Carrying them forward requires their knowing consent — opt-in re-enrollment is the cleanest path; silent assignment via a terms-of-service amendment is a weaker path that creates legal risk for both entities.
  3. The host LLC has been funding pre-formation operations — covering software, professional fees, events, and other operating costs that the Guild has not yet been able to cover from dues. The cumulative net cash position of "Guild activity" inside the LLC needs to be quantified and treated, by counsel, as one of: a charitable-style gift from the host owner to the new entity, a promissory note to be repaid by the new entity over time, or founder seed capital under a documented agreement. The treatment is not the working group's call; it is counsel's.
  4. The host LLC files Schedule C for the LLC owner; Guild net activity has been hitting the owner personally to date. The cut-over date is also a tax-period-defining moment, and the host LLC's books must be closeable on that date for the owner's accountant to treat it cleanly.
  5. The new 501©(6) cannot accept assignment of any obligation that conflicts with its exempt purpose, conflicts with its bylaws, or compromises its 501©(6) status under §501©(6) of the Internal Revenue Code.

Options considered

Option A — Hard cut-over with full opt-in re-enrollment

On a date certain (the cut-over date), the host LLC stops operating the Guild DBA. The new 501©(6) launches its own member portal, payment processor, and bank account. Existing members are emailed and asked to affirmatively re-enroll under the new entity, importing their credential status and tenure. Members who do not re-enroll within 90 days are treated as cancelled with their data retained per the new entity's privacy policy.

  • Pros: Cleanest legal posture. Each member has a fresh, documented relationship with the new entity. No dispute over data or consent.
  • Cons: Friction; member loss. Some active members will not re-enroll for inertia reasons even though they want the membership. Disrupts ongoing dues revenue during the transition window.

Option B — Soft cut-over with assignment by notice

On the cut-over date, the host LLC executes a written Assignment of Member Records and DBA Rights to the new 501©(6). Members are notified of the change with a 30-day window to opt out; non-response constitutes consent. Subscriptions, credentials, and member-portal accounts continue uninterrupted. Payment method and bank account change behind the scenes; member experience is invisible.

  • Pros: Lowest disruption. Continuity of dues revenue and member experience. Matches the way most acquisitions handle subscriber migration.
  • Cons: Relies on a "consent by silence" model that is weaker than affirmative consent. Some jurisdictions treat this as inadequate notice for subscription transfers; counsel will need to review state-by-state.

Option C — Hybrid: assignment by notice with affirmative confirmation at first interaction

On the cut-over date, the host LLC executes the Assignment as in Option B, and the new 501©(6) takes operational control. Members are notified by email of the change. The next time each member interacts with the new portal — to log in, to renew, to access a course, to register for an event — they see a one-screen confirmation that their record has moved and asks them to acknowledge it. Acknowledgment is recorded with timestamp. Members who do not interact within 90 days receive a personal follow-up before any account is closed.

  • Pros: Continuity of revenue and experience like Option B; affirmative documented consent like Option A; meaningfully stronger legal posture than B; meaningfully lower friction than A.
  • Cons: Requires the new portal to support the confirmation flow on day one. Adds engineering work to the cut-over checklist.

Decision

Adopt Option C — assignment by notice with affirmative confirmation at first interaction. The hybrid pathway protects the new entity legally, preserves member relationships, and treats members as adults whose consent matters.

Operational principles that follow from this decision

The following principles apply regardless of how the cut-over is executed in detail. They are the constraints counsel and the founding board should hold the working group to.

1. Clean separation of entities

  • The new 501©(6) opens its own bank account at a financial institution selected by the founding Treasurer; the host LLC's bank account is not used by the new entity for any purpose.
  • The new entity opens its own merchant processor account; the host LLC's merchant processor is closed or migrated by formal account transfer (not credential sharing).
  • The new entity gets its own EIN; the host LLC's EIN remains with the host LLC.
  • Software vendor accounts (LMS, community platform, CRM, email/SMS, accounting, project management) are transferred by ownership change, not by credential handoff. Where ownership transfer is not supported by the vendor, the new entity opens a fresh account and migrates data.
  • The domain ganjierguild.com is transferred to the new entity at the registrar level on the cut-over date.
  • A written Assignment of Member Records and DBA Rights is executed by the host LLC and accepted by the new 501©(6) on the cut-over date.
  • Members are notified at least 30 days in advance with a clear plain-English explanation of what is happening, what changes (and doesn't), and what their options are. This communication is the subscriber conversion FAQ plus a personal email.
  • Each member's first interaction post-cut-over triggers a one-screen affirmative confirmation in the portal; the confirmation is timestamped and retained in the new entity's records under the document retention policy.
  • Members may export or delete their data at any time before, during, or after the cut-over.

3. Pre-formation operating capital is treated by counsel

  • The host LLC's books for the period during which it hosted the Guild DBA are closeable on the cut-over date. The financial snapshot tracking pre-formation cash flow is the working substrate for that close.
  • Counsel determines whether the cumulative net cash the host LLC contributed to Guild operations is treated as a gift to the new entity, a loan to be repaid, or founder seed capital under a written agreement. The decision is documented in writing and adopted by the founding board on the record.
  • Whatever the treatment, it does not create an ongoing financial dependency, voting preference, or governance privilege for the host LLC's owner that conflicts with §501©(6) requirements.
  • The host LLC's owner may serve on the founding board on the same terms as any other founding director, with the same conflict-of-interest disclosures, the same recusal obligations, and the same fiduciary duties.

4. Prepaid annual subscriptions travel with the obligation

  • Members who paid annually under the host LLC and have not yet consumed the full year of service have a legal claim on the unearned portion of their dues.
  • That claim is transferred from the host LLC to the new 501©(6) on the cut-over date along with a cash transfer equal to the unearned portion. The new entity recognizes the obligation; the host LLC closes its books with the obligation discharged.
  • The unearned portion is calculated per member based on each member's renewal date, not by a blended average.

5. Comp and reduced-rate arrangements are converted, not assumed

  • The new 501©(6) does not automatically inherit comp or reduced-rate arrangements created under the host LLC's informal practice.
  • Each existing comp/reduced arrangement is reviewed by the Membership & Ethics committee under the Complimentary Membership Policy and Scholarship & Hardship Waiver, and converted to one of the policy's structured pathways (founding-member discount, honorary membership, scholarship/hardship waiver, or conversion to paying member).
  • The conversion conversation happens before the cut-over date or, if that's not feasible, in a documented 90-day window post-cut-over during which the prior arrangement continues unchanged.

6. The cut-over is a single, dated, documented event

  • The founding board names a cut-over date by motion at least 60 days in advance.
  • A cut-over checklist is attached to that motion, listing every system to be transferred, every account to be opened, every notice to be sent, every signature to be obtained. The checklist is owned by the Administrator, executed jointly with counsel, and reported back to the board on completion.
  • The cut-over date is reported to members in the 60-day, 30-day, 7-day, and day-of communications.
  • A post-cut-over report is filed with the board within 30 days summarizing what happened, what didn't, and any remediation underway.

Consequences

Positive

  • Members experience continuity; the new entity inherits a real community rather than starting from zero
  • The host LLC closes its Guild-related operations cleanly, with documented financials and discharged obligations
  • The new 501©(6) starts with its own EIN, its own bank, its own contracts, and its own consents — a posture counsel and IRS reviewers will recognize as clean
  • The decision principles in this ADR translate directly into a checklist counsel can execute against

Trade-offs accepted

  • The hybrid model (Option C) requires engineering work to support affirmative confirmation in the new portal; this is a one-time cost
  • Members who do not interact within 90 days will require personal outreach, a labor cost the Administrator and the Membership & Ethics committee absorb
  • The 30-day advance notice and the 90-day confirmation window mean the cut-over takes a 4–5 month total elapsed time from announcement to fully-confirmed roster

Follow-up actions required

  • Counsel drafts the Assignment of Member Records and DBA Rights instrument
  • Counsel determines the treatment of pre-formation operating capital (gift, loan, or seed) and documents it
  • The new entity opens its bank account, merchant processor, and EIN
  • The Administrator and counsel build the cut-over checklist and bring it to the board for approval
  • The Administrator and the new portal's developer build the affirmative-confirmation flow
  • The Membership & Ethics committee reviews and converts each comp/reduced arrangement
  • The Communications committee schedules the 60/30/7/day-of member communications based on the subscriber conversion FAQ
  • The Audit & Finance committee reviews the host LLC's pre-formation Guild books and signs off on the unearned-revenue cash transfer calculation
  • The founding board ratifies the cut-over date by motion and accepts the Assignment instrument

What this ADR does not decide

  • The specific cut-over date (named by separate board motion at least 60 days in advance)
  • The financial treatment of pre-formation operating capital (counsel decides; board ratifies)
  • The identity of the host LLC, its owner, or any other operational specifics of the pre-formation period (those are recorded in counsel's incorporation packet, not this ADR)
  • Whether existing members' CG/GPS credentials transfer (they do, by intent and by member consent — but the credential framework's formal recognition is governed by the Education & Certification committee, not this ADR)

References