The document discusses different legal structures for social enterprises, including benefit corporations, flexible purpose corporations, LLCs, L3Cs, and nonprofits. It provides an overview of the formation, management, taxation, and capitalization considerations for each structure. The key information presented includes the required filings and organizational documents, governance structures, tax treatment, and potential sources of funding for each type of social enterprise entity.

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. capital
EQUITY
DEBT
PRI
@socentlaw

10. Google

11. B corp certification

12. 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

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

14. management
PERIODIC ASSESSMENT
MUST PUBLISH RESULTS OF ASSESSMENT
@socentlaw

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

16. capital
depends on legal structure
@socentlaw

17. Method

18. benefit corporation

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

20. 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

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

22. 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

23. 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

24. 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

25. 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

26. 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

27. capital
EQUITY
DEBT
PRI
@socentlaw

28. greyston bakery

29. flexible purpose corporation

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

31. 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

32. 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

33. 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

34. capital
EQUITY
DEBT
PRI
@socentlaw

35. LLC

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

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

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

39. capital
EQUITY
DEBT
PRI
@socentlaw

40. Runa

41. L3C

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

43. 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

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

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

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

47. capital
DESIGNED SPECIFICALLY TO RECEIVE PRI
EQUITY
DEBT
@socentlaw

48. moo milk

49. nonprofit

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

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

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

53. capital
INDIVIDUAL DONORS
GRANTS
PRI
DEBT
NO EQUITY
@socentlaw

54. krochet kids

55. join the conversation
socentlaw.com
kyle@westawaylaw.com
@socentlaw
@kylewestaway
http://www.slideshare.net/kylewestaway/profit-purpose

56. Profit + Purpose
structuring social enterprise for impact