Evolving Landscape
Historically, social entrepreneurs often felt stuck between making money and doing good, expressed in the two primary legal structures: (1) a for-profit corporation, or (2) a tax exempt nonprofit organization.
Today, social entrepreneurs and the lawyers who support them are able to adapt these structures to support both financial and social objectives.
Organizations that thrive on both social and financial dimensions can be nonprofits, for-profit corporations, or tandem structures that marry for-profit and nonprofit entities together. This content also addresses certification options, which are not legal forms, but rather ways to affirm a particular social and/or environmental commitment and communicate it to the public.
Your choice of legal structure should be driven by thoughtful consideration of your goals for your venture. Specifically, we suggest that you clarify your priorities around seven factors, which will in turn inform the legal design of your venture.
You may be surprised at the options available to you.
Yes, nonprofits can generate significant earned income.
Yes, for-profits can legally anchor their social missions.
Yes, tandem structures exist that combine aspects of both the nonprofit and for-profit forms.
WHERE DO YOU WANT TO BE?
This diagram illustrates the spectrum of options for organizations seeking both financial sustainability and impact. All organizations start in the lower left quadrant, with an unproven financial model and an unproven path to impact.
Entrepreneurs do not face a binary choice between profitability and impact along some zero-sum continuum. Rather, the legal design decisions they make, and other choices made as their ventures mature, reflect their priorities in terms of both profit and purpose.
Where will you set your target?
Both for-profit and nonprofit organizations can reach the upper right quadrant where they achieve financial sustainability and social/environmental impact. As you develop your enterprise and face decisions and trade-offs, where do you want to be?