PROFIT + PURPOSE - Structuring Social Enterprise for Impact

Profit + Purpose structuring social enterprise for impact

@socentlaw#socent

historical context

maximize shareholder value duty to make the most $ for shareholders Business judgement rule Hostile takeovers constituency statutes @socentlaw

corporation

formation FILE ARTICLES OF INCORPORATION FORM BOARD OF DIRECTORS DRAFT BYLAWS HOLD ORGANIZATIONAL MEETING ISSUE STOCK @socentlaw

management MANAGED BY DIRECTORS OFFICERS RUN DAY TO DAY OPERATIONS REGULAR FILINGS REQUIRED @socentlaw

taxation SUBJECT TO CORPORATE TAX ON NET INCOME IF SHAREHOLDERS RECEIVE DIVIDENDS, THAT IS SUBJECT TO PERSONAL INCOME TAX @socentlaw

Google

B corp certification

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

formation 80/200 on B labs assessment include key language in organizing documents @socentlaw

management PERIODIC ASSESSMENT MUST PUBLISH RESULTS OF ASSESSMENT @socentlaw

taxation DEPENDING ON FORM 1ST TAX BREAKS IN THE CITY OF PHILADELPHIA @socentlaw

capital depends on legal structure @socentlaw

Method

benefit corporation

a new class of corporation mandate to operate for public benefit increase in transparency / accountability @socentlaw

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

third party standard DEVELOPED BY A PARTY NOT RELATED TO THE ENTITY IT’S MEASURING TRANSPARENT IN ITS METHODOLOGY @socentlaw

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

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

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

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

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

capital EQUITY DEBT PRI @socentlaw

greyston bakery

flexible purpose corporation

a new class of corporation allows corporation to pursue a special purpose protects directors from shareholder suit @socentlaw

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

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

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

formation FILE ARTICLES OF ORGANIZATION WITH THE STATE NEGOTIATE AND EXECUTE OPERATING AGREEMENT @socentlaw

management MOST FLEXIBLE LEAST AMOUNT OF FILINGS MEMBERS CAN OPERATE DAY TO DAY OR DELEGATE THAT TO MANAGERS @socentlaw

taxation MOST LLC’S CHOOSE PASS THROUGH TAXATION TREATMENT @socentlaw

a new class of LLC Elevates charitable purpose over profit allows a mix of philanthropic and private capital @socentlaw

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

formation FILE ARTICLES OF ORGANIZATION WITH THE STATE INCLUDE CHARITABLE PURPOSE IN ORGANIZING DOCS NEGOTIATE AND EXECUTE OPERATING AGREEMENT @socentlaw

management MOST FLEXIBLE LEAST AMOUNT OF FILINGS MEMBERS CAN OPERATE DAY TO DAY OR DELEGATE THAT TO MANAGERS @socentlaw

taxation MOST L3C’S CHOOSE PASS THROUGH TAXATION TREATMENT NO TAX EXEMPT STATUS @socentlaw

capital DESIGNED SPECIFICALLY TO RECEIVE PRI EQUITY DEBT @socentlaw

moo milk

nonprofit

formation FILE ARTICLES OF ORGANIZATION WITH THE STATE INCLUDING SUGGESTED IRS LANGUAGE FILE 1023 APPLICATION WITH IRS DRAFT BYLAWS HOLD ORGANIZATIONAL MEETING @socentlaw

management MANAGED BY DIRECTORS MUST STAY WITHIN STATED CHARITABLE PURPOSE OR RISK LOSING TAX EXEMPT STATUS @socentlaw

taxation EXEMPT FROM FEDERAL INCOME TAX LIABLE FOR TAX ON UBIT DONATIONS ARE TAX DEDUCTIBLE @socentlaw

capital INDIVIDUAL DONORS GRANTS PRI DEBT NO EQUITY @socentlaw

krochet kids

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Profit + Purpose structuring social enterprise for impact

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PROFIT + PURPOSE - Structuring Social Enterprise for Impact

by Kyle Westaway

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