PROFIT + PURPOSE - Structuring Social Enterprise for Impact

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Legal Structures for Social Entrepreneurs. …

Legal Structures for Social Entrepreneurs.

This presentation addresses:
-Corporation
-B Corp Certification
-Benefit Corporation
-Flexible Purpose Corporation
-L3C
-Nonprofit

For each legal structure, this presentation addresses:
-formation
-management
-taxation
-capital

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  • Hi, the New York Times had a story on these emerging corporations yesterday. 4/11/13. Any news on tax breaks for companies who provide environmental preservation services to individuals? In NY?
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  • 1. Profit + Purpose structuring social enterprise for impact
  • 2. @socentlaw#socent
  • 3. historical context
  • 4. maximize shareholder value duty to make the most $ for shareholders Business judgement rule Hostile takeovers constituency statutes @socentlaw
  • 5. corporation
  • 6. formation FILE ARTICLES OF INCORPORATION FORM BOARD OF DIRECTORS DRAFT BYLAWS HOLD ORGANIZATIONAL MEETING ISSUE STOCK @socentlaw
  • 7. management MANAGED BY DIRECTORS OFFICERS RUN DAY TO DAY OPERATIONS REGULAR FILINGS REQUIRED @socentlaw
  • 8. taxation SUBJECT TO CORPORATE TAX ON NET INCOME IF SHAREHOLDERS RECEIVE DIVIDENDS, THAT IS SUBJECT TO PERSONAL INCOME TAX @socentlaw
  • 9. Google
  • 10. B corp certification
  • 11. certification for sustainable business Voluntary certification Not legal structure can be applied to any legal structure differentiates good companies from companies with good marketing @socentlaw
  • 12. formation 80/200 on B labs assessment include key language in organizing documents @socentlaw
  • 13. management PERIODIC ASSESSMENT MUST PUBLISH RESULTS OF ASSESSMENT @socentlaw
  • 14. taxation DEPENDING ON FORM 1ST TAX BREAKS IN THE CITY OF PHILADELPHIA @socentlaw
  • 15. capital depends on legal structure @socentlaw
  • 16. Method
  • 17. benefit corporation
  • 18. a new class of corporation mandate to operate for public benefit increase in transparency / accountability @socentlaw
  • 19. general public benefit A MATERIAL POSITIVE IMPACT ON SOCIETY AND THE ENVIRONMENT, TAKEN AS A WHOLE, ASSESSED AGAINST A 3RD PARTY STANDARD, FROM THE BUSINESS AND OPERATIONS OF A BENEFIT CORPORATION. @socentlaw
  • 20. third party standard DEVELOPED BY A PARTY NOT RELATED TO THE ENTITY IT’S MEASURING TRANSPARENT IN ITS METHODOLOGY @socentlaw
  • 21. specific public benefit PROVIDING INDIVIDUALS / COMMUNITIES WITH BENEFICIAL PRODUCTS OR SERVICES PROMOTING ECONOMIC OPPORTUNITIES FOR INDIVIDUALS OR COMMUNITIES BEYOND JOB CREATION Promoting health / Environmental preservation Promoting Arts / sciences @socentlaw
  • 22. transparency ISSUE ANNUAL REPORT INCLUDING RECORD OF SUCCESSES AND FAILURES for general and specific public benefit 120 DAYS AFTER THE CLOSE OF THE FISCAL YEAR PUBLICLY AVAILABLE @socentlaw
  • 23. formation FILE ARTICLES OF INCORPORATION STATing benefit corporation STATUS and specific public benefit IF EXISTING CORP, MUST HAVE 2/3 VOTE DRAFT BYLAWS HOLD ORGANIZATIONAL MEETING ISSUE STOCK including specific language @socentlaw
  • 24. management MANAGED BY DIRECTORS OFFICERS RUN DAY TO DAY OPERATIONS DIRECTORS MUST TAKE BENEFIT INTO ACCOUNT ON ALL DECISION MAKING ANNUAL ASSESSMENT BY 3RD PARTY Most states require a “benefit director” @socentlaw
  • 25. taxation SUBJECT TO CORPORATE TAX ON NET INCOME IF SHAREHOLDERS RECEIVE DIVIDENDS, THAT IS SUBJECT TO PERSONAL INCOME TAX no tax favored status.... yet. @socentlaw
  • 26. capital EQUITY DEBT PRI @socentlaw
  • 27. greyston bakery
  • 28. flexible purpose corporation
  • 29. a new class of corporation allows corporation to pursue a special purpose protects directors from shareholder suit @socentlaw
  • 30. formation FILE ARTICLES OF INCORPORATION STATing FPC STATUS and special purpose IF EXISTING CORP, MUST HAVE 2/3 VOTE DRAFT BYLAWS HOLD ORGANIZATIONAL MEETING ISSUE STOCK @socentlaw
  • 31. management MANAGED BY DIRECTORS OFFICERS RUN DAY TO DAY OPERATIONS DIRECTORS MAY CHOOSE TO INCLUDE BENEFIT IN DECISION MAKING NO 3RD PARTY VERIFICATION ANNUAL BENEFIT REPORT @socentlaw
  • 32. taxation SUBJECT TO CORPORATE TAX ON NET INCOME IF SHAREHOLDERS RECEIVE DIVIDENDS, THAT IS SUBJECT TO PERSONAL INCOME TAX NO TAX FAVORED STATUS… YET. @socentlaw
  • 33. capital EQUITY DEBT PRI @socentlaw
  • 34. LLC
  • 35. formation FILE ARTICLES OF ORGANIZATION WITH THE STATE NEGOTIATE AND EXECUTE OPERATING AGREEMENT @socentlaw
  • 36. management MOST FLEXIBLE LEAST AMOUNT OF FILINGS MEMBERS CAN OPERATE DAY TO DAY OR DELEGATE THAT TO MANAGERS @socentlaw
  • 37. taxation MOST LLC’S CHOOSE PASS THROUGH TAXATION TREATMENT @socentlaw
  • 38. capital EQUITY DEBT PRI @socentlaw
  • 39. Runa
  • 40. L3C
  • 41. a new class of LLC Elevates charitable purpose over profit allows a mix of philanthropic and private capital @socentlaw
  • 42. program related investment TAX REFORM ACT OF 1969 REQUIRED STRICT CONSERVATIVE RULES ON FOUNDATION INVESTMENT PRI IS AN EXCEPTION FOR ORGANIZATIONS THAT HAVE A CHARITABLE PURPOSE USED INFREQUENTLY @socentlaw
  • 43. formation FILE ARTICLES OF ORGANIZATION WITH THE STATE INCLUDE CHARITABLE PURPOSE IN ORGANIZING DOCS NEGOTIATE AND EXECUTE OPERATING AGREEMENT @socentlaw
  • 44. management MOST FLEXIBLE LEAST AMOUNT OF FILINGS MEMBERS CAN OPERATE DAY TO DAY OR DELEGATE THAT TO MANAGERS @socentlaw
  • 45. taxation MOST L3C’S CHOOSE PASS THROUGH TAXATION TREATMENT NO TAX EXEMPT STATUS @socentlaw
  • 46. capital DESIGNED SPECIFICALLY TO RECEIVE PRI EQUITY DEBT @socentlaw
  • 47. moo milk
  • 48. nonprofit
  • 49. formation FILE ARTICLES OF ORGANIZATION WITH THE STATE INCLUDING SUGGESTED IRS LANGUAGE FILE 1023 APPLICATION WITH IRS DRAFT BYLAWS HOLD ORGANIZATIONAL MEETING @socentlaw
  • 50. management MANAGED BY DIRECTORS MUST STAY WITHIN STATED CHARITABLE PURPOSE OR RISK LOSING TAX EXEMPT STATUS @socentlaw
  • 51. taxation EXEMPT FROM FEDERAL INCOME TAX LIABLE FOR TAX ON UBIT DONATIONS ARE TAX DEDUCTIBLE @socentlaw
  • 52. capital INDIVIDUAL DONORS GRANTS PRI DEBT NO EQUITY @socentlaw
  • 53. krochet kids
  • 54. join the conversation socentlaw.com kyle@westawaylaw.com @socentlaw @kylewestaway
  • 55. Profit + Purpose structuring social enterprise for impact