Charity? Non-profit? No profit?

We've spoken before about Lichess's ethical stance and how we do "business". Indeed, at the bottom of this and every other of our blog posts there is a short explanation:

Lichess is a charity and entirely free/libre open source software.
All operating costs, development, and content are funded solely by user donations.

We aren't going to focus on that aspect again (at least not today), but instead clarify what it means to be a non-profit or a charity, as it's clearly a message that needs to get out there more:

FIDE Director General Emil Sutovsky said in an interview that FIDE is the only non-profit chess body.

Surely it was an honest mistake, but Lichess, the second largest chess website in the world with more than 5 million games played daily, is a registered French non-profit. pic.twitter.com/yIHItfonRg
--- Lichess.org (@lichess) September 26, 2022

Stick with us through the definitions!

Non-profit : no net profit (income beyond expenses) will benefit any individual.

This is in contrast to most businesses where either private owners or public shareholders gain financial benefits from the profits of the business.

Charity: an organisation with philanthropic goals, aiming to improve a community in some way.

Of course, precise legal definitions will vary by country, and technically Lichess is a French association --- which encompasses non-profit status and charitable status --- with a goal to "promote and encourage the teaching and practice of the game of chess and its variants".

Definitions over, onto the main article!

A common misconception we see is that our non-profit status means Lichess is barely surviving. After all, an organisation without profit is a bad organisation, right? No!

Profit is a mechanism where individuals (owners or shareholders) syphon off value from an organisation for their personal gain. For a non-profit, we can generate the same income as a for-profit company, but the key difference is that all of that income goes back into the organisation, to keep it growing, keep making it better, and in our case keep it free.

There is a lot of rhetoric about how businesses can do more for the community, by virtue of being for profit. But in reality, a non-profit is putting 100% of its income back into the community. The absolute amounts may be different, since a smaller percentage of a larger total income can still be more overall, however for equivalent income a non-profit is by definition doing more (or at least should be!).

Lichess also generates (almost) all our income from donations, but in theory, a non-profit could have a subscription/paywall model and possibly generate much more income (don't worry, we won't). The reason we do not use that kind of business model is not that a charity could not use it. Instead it is because we think it is a bad model for achieving our goal of promoting chess.

The final wrinkle in the definitions is that it is possible to be a non-profit but, like FIFA, still take money out of an organisation in other ways. Rule-abiding non-profits (such as Lichess) also pay salaries to employees. We publicise these at lichess.org/costs so you can see whether these are in line with market rates and reasonable.

Lichess has plans to become a higher category of charity within France - and some of what we've done over the year is to research and begin that multi-year process. We will give an update on that, and our charity's plans, later this year.

Thanks for listening to our TED talk!