Frontier Market Scouts: “Business Entities for Social Enterprise”

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The following blog post was written by Chris Hurtado, a Frontier Market Scout.

In the past year, there has been a lot of innovation around new types of business entities for social enterprise. For example, California recently passed legislation adopting two new business entities: the Benefit Corporation and the Flexible Purpose Corporation. In addition, the Low-Profit Limited Liability Company (L3C) has been adopted by statute in eight states. These new entities offer various benefits to social entrepreneurs and impact investors. Some promise increased levels of accountability and “anchoring” to an organization’s social mission. Others promise increased access to certain funding streams like program related investments (PRIs) from private foundations. Still others promise protection from shareholder litigation if the organization chooses impact over profits.

In future posts, I will share my perspective on the extent to which these purported benefits are real and what drawbacks, if any, come along with the benefits. In the meantime, I want to share a basic one-page summary (front & back–okay, I’m sort of cheating) of the various options available to social entrepreneurs. A simple google search will reveal a lot of coverage of the various entity forms, but I haven’t seen a simple, comprehensive summary accessible to laypersons. My take on such a document is below, but I happily treat this as a work-in-progress and welcome any feedback.

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