Thursday, June 18, 2009

Yoga-nomics: Structuring the Business

With the wave of social awareness cresting in the Blue states, how can individuals and groups bring "Change" that is necessary. With current structures of ownership, it can be difficult at best.

So, as the pitfalls of unbridled capitalism are uncovered around us, we require new ways of organizing socially responsible activities.

Social enterprises that have a clearly defined mission often don't fit neatly into existing ownership structures. Those that register as nonprofits have trouble tapping private capital to expand, while for-profit companies risk compromising their missions because they must put shareholders' returns first. But growing interest in hybrid business models has brought about efforts at the state level to create new corporate structures that allow entrepreneurs to combine nonfinancial goals into for-profit businesses.

One new form, known as the Low-profit Limited Liability Company (or L3C), is intended for companies that put their missions before profits. The structure lets them qualify for loans or investments that further a foundation's goals and also may yield financial returns. First adopted in Vermont in April 2008, the L3C is now also on the books in Michigan, Utah, and Wyoming. There are 53 L3Cs in Vermont and a handful in other states so far.

For now, however, social ventures must find creative ways to straddle the line between nonprofit and for-profit. All of these entail complex combinations of for- and not-for-profit corporate structures, attorneys for each organization, property right and intellectual property agreements and clear-cut equity and debt arrangements. Putting together these solutions can be time consuming and cumbersome.

Excerpted from Business Structure Article