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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
capital

   EQUITY
   DEBT
   PRI




            @socentlaw
LLC
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
capital

   EQUITY
   DEBT
   PRI




            @socentlaw
Runa
L3C
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
join the conversation
                 socentlaw.com
                kyle@westawaylaw.com
                @socentlaw

                @kylewestaway
Profit + Purpose
   structuring social enterprise for impact

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PROFIT + PURPOSE - Structuring Social Enterprise for Impact

  • 1. Profit + Purpose structuring social enterprise for impact
  • 4. maximize shareholder value duty to make the most $ for shareholders Business judgement rule Hostile takeovers constituency statutes @socentlaw
  • 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
  • 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
  • 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
  • 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
  • 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
  • 54. join the conversation socentlaw.com kyle@westawaylaw.com @socentlaw @kylewestaway
  • 55. Profit + Purpose structuring social enterprise for impact