Increasingly, social entrepreneurs struggle to choose a legal form for their ventures. The traditional legal forms are not suited to blended social and profit-making purposes. Mangers of a for-profit socially responsible business can find themselves liable to shareholders for failure to maximize profit at all coasts. Conversely, managers of tax-exempt nonprofits conducting social entrepreneurial activities can find themselves liable to the IRS when they try to reward investors and incentivize results.
Daily Dose of Nonprofit Law
Category Archives: Flexible Purpose Corporation
More Legal Structure Choices Becoming Available for the Socially Responsible Business by Keren Raz
It has been a busy year for proponents of new legal forms. The benefit corporation goes into effect in Virginia on July 1. Benefit corporation legislation has also been introduced in California, Colorado, Hawaii, North Carolina, Pennsylvania, and Michigan. Maryland, the first state to pass benefit corporation legislation, recently authorized LLC versions of the benefit corporation.
What is a Flexible Purpose Corporation? by Keren Raz
California may soon offer a new corporate form for social enterprises. The California legislature is considering a bill, S.B. 1463, that would create a new corporate form called the Flexible Purpose Corporation. Similar in purpose to the L3C and the Benefit Corporation, the Flexible Purpose Corporation would provide directors with more flexibility to pursue environmental and social purposes in addition to profitability. To become a flexible purpose corporation, a company’s articles of incorporation would have to specify a “special purpose” that the corporation engages in, which can include but is not limited to charitable activities.
