Are you actually a bank? That’s a highly restricted term. To the point that non-banking subsidiaries of banks (like brokerages) use the word Banc to avoid the restrictions.
A Bank for Student Hackers
31–40 of 46 posts
Re: A Bank for Student Hackers
#32Earlier quoted context omitted.
"takes over a year and thousands of dollars to create a new entity in the US" This is a very misleading statement. 4 years ago I setup a 501(c)3 non profit and was able to get state and federal recognition, as well as all licensing necessary handled in a 4 month period from start to finish for under $400. What it does take is persistence and patience.
Sorry, should definitely clarify better - it comes down to whether you're filing a 1023 or a 1023EZ. Many events need to file 1023 due to expected annual budget being over $50K. I'm happy you were able to get your status so quickly. It took us about a year. The filing fee for the 1023 alone is $600. The IRS has an overview of the expected timelines at https://www.irs.gov/charities-non-profits/charitable-organiz... ,…
If you are running events in the 50k range you have capital to manage the process. I still fail to see the argument you are making, few groups as you mention here are running 50k events.
Re: A Bank for Student Hackers
#33This problem/market is very interesting and strange to me. In my country, you're able to open a bank account in 15 minutes, the only requirement is to have a parent present if you're under 15, of course you have to present your identity, and you have to deposit just 200 to 1000 CZK (7.5 to 50 dollars, or 5 to ±30 beers). No credit checks, no solvency requirements, no debt-free only policy, nothing like that, you lite…
Plenty of high school kids have bank accounts here. That's not the issue.
The problem is that a personal bank account doesn't qualify as a non-profit under U.S. tax laws. So donors can't write off the donation and the kid would be assessed income taxes on the donation.
Re: A Bank for Student Hackers
#34This problem/market is very interesting and strange to me. In my country, you're able to open a bank account in 15 minutes, the only requirement is to have a parent present if you're under 15, of course you have to present your identity, and you have to deposit just 200 to 1000 CZK (7.5 to 50 dollars, or 5 to ±30 beers). No credit checks, no solvency requirements, no debt-free only policy, nothing like that, you lite…
Plenty of high school kids have bank accounts here. That's not the issue. The problem is that a personal bank account doesn't qualify as a non-profit under U.S. tax laws. So donors can't write off the donation and the kid would be assessed income taxes on the donation.
Huh, that makes it even stranger. How do you e.g. share flats? Buy tickets for a concert as a group? Buy a plane ticket as a group? This is basic stuff...
Re: A Bank for Student Hackers
#35I hope you would consider expanding this to cover all student organizations - it's not just hack clubs that hold events or seek donations.
Re: A Bank for Student Hackers
#36This is a great idea. Have you discussed this with a lawyer? It seems like this would qualify you as a money transmitter which has very strict requirements in many states. There are restrictions on the word "bank" and how that term can be used too.
Yeah, this is straight up illegal in my country (Australia) - to call yourself a ‘bank’ referring to financial services you need to be a licensed Authorised Deposit-taking Institution (ADI) with our prudential regulator (APRA). This requires going through a compliance program that would probably take longer than a year, having $50 million (!) of paid up capital, etc. Just a few months ago they did bring in a new rest…
Whilst what you say is true, I don't think it would be impossible to create a structure that achieves similar outcomes without being a licensed ADI.
If I were attempting to do a similar thing, rather than positioning the "bank" as a separate service, I'd be offering full "auspicing" as many national NGOs have traditionally done for locally-run activities, where the "bank" service is actually just automating internal financial procedures for authorising transfers of money that belongs to the incorporated body rather than accepting deposits on behalf of a separate group of people.
edit: hah, just read the comments below and this seems to be exactly what they're doing
Re: A Bank for Student Hackers
#37Just FYI, You can't call yourself a bank. It is a restricted term in most US states and the UK.
Re: A Bank for Student Hackers
#38This is a great idea. Have you discussed this with a lawyer? It seems like this would qualify you as a money transmitter which has very strict requirements in many states. There are restrictions on the word "bank" and how that term can be used too.
Fortunately we're not acting as a money transmitter, but rather as a fiscal sponsor - see https://en.wikipedia.org/wiki/Fiscal_sponsorship . A very common practice in the non-profit world, but very much not something that is accessible to students. Most fiscal sponsors out there are very bureaucratic and not set up to handle short-term engagements like hackathons.
Hey Zach, if you want to open bank accounts with an API and be able to provide real time balances to your users ping me ... I can help make that a reality
Re: A Bank for Student Hackers
#39This is a great idea. Have you discussed this with a lawyer? It seems like this would qualify you as a money transmitter which has very strict requirements in many states. There are restrictions on the word "bank" and how that term can be used too.
Yeah, this is straight up illegal in my country (Australia) - to call yourself a ‘bank’ referring to financial services you need to be a licensed Authorised Deposit-taking Institution (ADI) with our prudential regulator (APRA). This requires going through a compliance program that would probably take longer than a year, having $50 million (!) of paid up capital, etc. Just a few months ago they did bring in a new rest…
I'm pretty sure that's been relaxed to $35m. ;-)
Although the other onerous requirement for a bank is that it can't have any one owner with more than 5% shareholding (although there's a lender here that's trying to get the government to change that).
Re: A Bank for Student Hackers
#40This is a great idea.
Having said that, school groups do spend money, bands, clubs and etc.... how are the others doing it successfully?
"The only person who had access to the bank account was the principal, but nobody knew where he was. 24 hours later, Jake and I were on the phone with the vice principal who was also left in the dark. A week later, the principal showed up in Tokyo and the money was still completely restricted. They missed the deadline for purchasing the flights and the trip was cancelled. What the hell happened?"
What did happen? They never really explain that.