Alternative Legal Structures for Social Entrepreneurs

Social entrepreneurs create organizations that operate like a business, but with a social mission. 

This makes them different from the traditional non-profits, with the main difference being they attempt to create organizations that scale and become financially self-sustaining instead of relying on a non-stop stream of donations.

It's an exciting, growing field and a key reason the non-profit sector managed to grow through the Great Recession.  

The Wall Street Journal has a good article covering the different legal structures social organizations can use to better accomplish their combined mission of social good with business practices. 

These include the L3C, the Benefit Corporation (referred to as the "B Corp") and the Flexible-Purpose Corporation.  Because of the legalities involved, I'm referring you to the article for more details. 

Also, you should consult a lawyer or accountant prior to deciding what type of legal structure you want to form. 

The growing availability and use of socially-oriented legal structures is a clear signal that social entrepreneurship continues to be on a growth trajectory. 

Comments

[Anne Field]

Just one comment--My understanding is that L3cs and Benefit Corps are for profits with a social/environmental mission. (The L3c is a "low-profit" company.) Also, there are now seven states with legislation creating a new corporate form for Benefit Corporations, protecting them from law suits if they consider the interests of non-financial stakeholders before financial interests.

So these are not to be confused with non-profit social entrepreneurial organizations that run themselves like businesses, with the ability to scale.

Anne Field
www.annefieldonline.com
Twitter: @annearfannearf

[Steve]

Sure. Inveneo (http://www.inveneo.org/) is a good example.

They are a non-profit that brings IT solutions to folks in the developing world. But instead of operating like a traditional non-profit, they run their operation like a for profit business.

A good resource on social entrepreneurs - with lots of examples - is the Skoll Foundation (www.skollfoundation.org/), which supports social entrepreneurs. Take a look at their site for more info.

[Nick Carter]

I think I understand what you mean by social entreprenuer, but I'm not positive. Can you give some examples of these org's?