Hybrid Business Structures – Social Enterprise Corporations
What is “social enterprise?” Well, social enterprises are businesses that are dedicated to tackling social problems, improve communities, people’s life chances, or the environment in addition to making a profit. They make their money from selling goods and services in the open market, but they are free to reinvest their profits back into the business or the local community if they so choose – insulated from shareholder derivative lawsuits for making corporate decisions that do not put the shareholder’s profit first.
In California, the primary corporate forms for this type of hybrid entity are Benefit Corporations and Social Purpose Corporations. An additional form, called a L3C (or low-profit, limited liability company) is not yet offered in the state, but can be created in another state and then authorized to do business in California.
A Benefit Corporation offers many benefits for a socially conscious enterprise, but there are several legal and administrative requirements including a requirement to be assessed using and independent third party standard.
Unlike Benefit Corporations, Social Purpose Corporations (formerly “Flexible Purpose Corporations“) are not required to have a purpose of creating general public benefit, nor are they required to prepare assessments based on third party standards.
For Purpose Law Group has a dedicated group of experienced attorneys knowledgeable about the specific, and very unique, requirements of these new corporate forms in addition to the more typical partnerships, LLCs and domestic stock corporations. If you are just launching your business, we have reasonable flat-fee packages for all business entity types. On an ongoing basis, we offer Outside General Counsel services, to provide timely legal counsel to business clients in areas of need including employment, taxation and corporate compliance.