[JUjFJE2I9Y]

"...As of June 2020, Signal had more than 32.4 million total downloads, and the app had approximately 20 million monthly active users as of December 2020...." [0]

"...The initial $50M in funding was a loan, not a donation, from Brian Acton to the new nonprofit Signal Technology Foundation. By the end of 2018, the loan had increased to $105,000,400, which is due to be repaid on February 28, 2068. The loan is unsecured and at 0% interest..." [1]

What happens when they add 50M or 100M more users?

[0] https://en.wikipedia.org/wiki/Signal_%28software%29 [1] https://en.wikipedia.org/wiki/Signal_Foundation

[caturopath]

Why is this structured as a loan? It sounds like it's structured in such a way that he isn't interested in getting paid back. Is it so he can exercise control in a weird scenario like a buyout? Is it some weird tax thing?

[colechristensen]

Something like an unusual sort of ownership. If signal was sold, the buyer would be on the hook for all of the debt.

Startup funding that looks more like debt than stockholding isn’t all that weird, and has various implications for exit scenarios.

If you wanted to create something similar to a nonprofit, this is a way you could do it while protecting it from vultures.

[aaron_m04]

Interesting! Where can I read more about this technique?

[toomuchtodo]

https://en.wikipedia.org/wiki/Shareholder_rights_plan

[tw04]

I'm assuming so that if moxy gets hit by a bus and someone else tries to step in and monetize it, he gets his money back. If it remains free and open source I'm sure he'll forgive it.

[jandrese]

My first thought is it must be a tax thing, although I guess it could be a hedge against them selling out depending on how the agreement is worded.

[reactor]

Its just for books. Loan is still an asset, but donation is not. He will have this asset for abt 50 yrs in the book, that's useful if he want raise money for something else. Pretty sure he don't intend to get it back.

[some_random]

0% interest repaid in 48 years... I'm sure they'll figure something out

[alg0]

The loan seems to be more a techinical stand-point than a real loan.

[bilal4hmed]

The loan is not a loan, its a gift. There was some tax reason it was done this way

[caturopath]

Do you understand what the tax play is?

[bilal4hmed]

https://aronsonllc.com/nonprofit-organizations-accounting-fo...

I dont understand it much, but its to make Signals life easier during tax time since its such a large gift.

[dmitrygr]

If I give you a gift, it is income and you owe taxes on it. If I give you a loan, it is not income and no taxes are owed. But tax man will expect you to pay it off! If I forgive you a loan, that is also taxable income, in the amount that you have not yet paid off, so no loophole there.

[caturopath]

But the Signal Foundation is a 501(c)(3), so their donors don't owe taxes on the donations, right?

[coolspot]

It may be different between an individual and a business, but for gift between individuals it is the donor who pays the tax:

https://www.irs.gov/businesses/small-businesses-self-employe...

[caturopath]

This is between an individual and a charity, though, right?

[cge]

It is possible that it avoids having the Signal Foundation fail the public support test, usually a requirement that a public charity receive at least 1/3 of their donation revenue from donors giving less than 2% of the nonprofit's overall receipts. Failing this would cause the foundation to be a private foundation.

[jelliclesfarm]

There could be conflict of interest if it’s a gift considering Acton was involved with WhatsApp before Signal was formed.

And a donation would bring him deductions which he probably doesn’t want..

And there is a gift tax but since it’s a non profit, it gets different treatment. But having said that IRS scrutiny increases with such large donations.

Chances high for an IRS audit. Etc.

So many reasons why the loan aspect is a better idea.

[caturopath]

I don't understand practically any of this very well.

> There could be conflict of interest if it’s a gift considering Acton was involved with WhatsApp before Signal was formed.

Why is this conflict of interest less significant by structuring as a loan?

> And a donation would bring him deductions which he probably doesn’t want..

Why wouldn't he want them?

Is he time-shifting them or forgoing them?

> And there is a gift tax but since it’s a non profit, it gets different treatment.

A charitable donation isn't subject to gift tax.

> But having said that IRS scrutiny increases with such large donations.

> Chances high for an IRS audit. Etc.

Acton is a billionaire, his returns will receive scrutiny every year.

What's the etc? How is it better with a loan and why?

[jelliclesfarm]

Let me try. I am not a legal person.

I think there is a limit to the amount of gift in cash or other assets you can make without triggering a federal gift tax of around 40%. For an individual there is a limit of life time gift tax exemption around 11.5 million and 23 million if the gift is made as a couple.

1. A loan is a business transaction here. There is an expectation that it will be repaid. It can also be forgiven. A donation to a non profit can be ‘rewarded’ by way of tax deductions.

So Acton will profit from a similar tech he has already sold to Facebook as WhatsApp. His wealth likely came from WhatsApp sale to Facebook. It can be argued as conflict of interest.

Loan deals are very clean. Cut and dried. Any implied contract between the parties ends when the loan is repaid and the relationship is terminated.

2. I can’t speak for Acton. Or in any legal capacity, but if it were me, tax deductions to a non profit can be rife with complications because if he ever gets involved with signal as a board member or employee, it might rise questions.

3. Signal foundation is not a charity.

4. Even a billionaire ..and especially one..would prefer to keep books less complicated for IRS. Donations are often scrutinized for money laundering or tax evasion.

5. A gift invites taxes, iirc. Like..if I gifted you above 15k(and you are not my family or part of a trust/insurance beneficiary etc), you will have to pay taxes on the realized value of the gift.

6. This might have been an ideological instinct for Acton as there seems to have been some disagreement between Acton and FB on how they intended to take WhatsApp. Maybe this isn’t about money at all. Who knows. Hence the ‘Etc’.

Also I don’t know exactly what kind of non profit Signal is...

[IG_Semmelweiss]

Ianal.

Generally speaking, noncompete agreements prevent you from taking equity / ownership or active role in competitors

They say nothing about loans. Thats from the many agreements i have come across between businesses and partners/employees