Consider establishing a Corporation or a Limited Liability Company (LLC)
Corporations have the following advantages:
- Separate legal entity providing for limited liability of shareholders for the debts of the corporation;
- Perpetual existence with easily transferable ownership interests;
- Generally regarded as the most suitable legal structure for raising capital (debt or equity);
- Relatively simple to provide equity compensation for employees;
- Can rely on business judgment rule to promote social and/or environmental mission that is in the long- or short-term best interests of the corporation
BUT:
- The formation process is complicated with prescribed procedures;
- Formalities in formation and management must be adhered to;
- Competitive market pressures and concerns regarding duties to maximize shareholder value may discourage corporations from pursuing social or charitable purposes;
- Corporations might be prohibited or restricted in certain instances from prioritizing social or environmental purposes that negatively impact shareholder value;
- Constituency statutes designed to allow for additional considerations outside of shareholder value lack accountability and disclosure and often conflict with other provisions governing corporations
Download guidance about setting up a Corporation
OR:
Case Study: Revolution Foods, Inc.
All pictures are Reuters pictures unless otherwise stated.
Founded in 2006, Revolution Foods, Inc., a Delaware corporation, provides fresh, healthy meals and offers nutrition education programs to students nationwide. Revolution Foods’ mission is to lead the conversation on childhood health and improve the lives of hundreds of thousands of students every single day. Revolution Foods is committed to making an impact by providing healthy meals and offering nutrition education programs designed to encourage healthier eating decisions. Revolution Foods also promotes family nutrition through a retail product offering and is a certified B Corporation (see Section 4).
For more information, please visit http://revolutionfoods.com.
Next steps
Now that you have an overview of what structures may be most suitable for your social venture, you should seek legal advice to ensure the structure meets all your organization’s needs.
TrustLaw, the Thomson Reuters Foundation global pro bono legal program, connects social enterprises with leading law firms to provide free legal assistance on issues such as a structuring. In the US alone, TrustLaw supports over 175 social enterprises with free legal assistance.
Apply to join TrustLaw to request free legal advice for your social venture.