Jay Parkhill July 23rd, 2008
Attorney Gene Takagi has a really informative blog on legal issues for nonprofit businesses. He has a post today on LLCs owned by charities and raises some good questions about how to insulate the charity from liability (e.g. if the charity owns real estate) and whether donations from to the LLC would be deductible.
Nonprofit Law Blog: Charity-Owned Limited Liability Companies
In many ways, this structure is a complement to the B Corporation idea I have blogged about previously. A charity-owned LLC is essentially a for-profit subsidiary of the charity, while the B corporation is a for-profit company that may provide economic benefit to charitable organizations.
I am presently working on the latter concept- a B corporation set up specifically so that it can grow as a for-profit company, but which is very closely tied to a non-profit business and provides economic benefits back to the non-profit. As the project matures, I hope to share detailed information about the business and its structure. I would love to write a case study comparing the relative merits of the B corporation approach with the charity-owned LLC. It seems clear that the structures serve related but different purposes. A primer that helped figure out which to use when could be valuable.
Jay Parkhill June 16th, 2008
My last post was a wonky one on changes in California law that affect company management’s ability to consider social good as well as shareholder value. Here is a complementary piece to that, courtesy of Harvard Business School’s Working Knowledge newsletter.
Spending on Happiness — HBS Working Knowledge
The jist of the piece is that we spend our lives trying to accumulate money, but succeeding at that doesn’t make us any happier. Instead, the researchers found that spending money on other people does increase happiness.
The article talks specifically about personal spending, but I am willing to bet that it holds true for companies as well. Knowing that your company gives away money to help outside causes increases loyalty toward the business.
Jay Parkhill May 18th, 2008
There’s the C corporation that most people are familiar with (what you get if you don’t specify anything else) and the S corporation that is tax free but doesn’t allow preferred stock. Both of these names come from the sections of the IRS tax code that describes them.
Add now the B corporation. The “B” stands for “beneficial”. It doesn’t have special tax rules- instead the intent is to tell people clearly that the company considers benefit to its employees, the general public, the environment etc. along with shareholder profits. The organizers have developed a community of B-corp adopters, and it includes a bunch of “green businesses” but also a couple of big law firms, a skateboard manufacturer and a handful of software companies.
The challenge of socially entrepreneurial companies is that they can do very well, get acquired or obtain outside capital and/or management, and the core principles can get diluted. The B corporation process doesn’t prevent this from happening, but it does make loud and clear that social good is a core element of the business.
So how does one become a B corporation? First, one must fill out a survey. A passing score means that one can take the next step of amending the corporation’s Bylaws and Articles of Incorporation to state the social purpose(s) clearly. I haven’t done it yet, but I am going to take the survey as it applies to my own business. I hope I score well!
There is nothing magical about any of this. It can all be changed or abandoned completely. It is, though, a way to tell the world what your company cares about strongly. That can be good for the company, good for business and- one hopes- good for the world.