Social entrepreneurship is a rapidly emerging field in which nonprofit and business leaders develop mission-driven enterprises.
Social enterprise deals with creating and leading organizations that advance social change through innovative solutions.
The traditional lines are blurring between nonprofit organizations, government, and business enterprises.
Our social enterprise law firm helps entrepreneurs to understand the opportunities and challenges in this new landscape.
Why is there growing interest in social enterprises?
There are many reasons why social enterprises are getting a boost.
- Nonprofits generally rely on donations to support their causes. There in an increase in the number of charities competing for charitable funds (foundations, individual support, corporate foundations, government support).
- Many nonprofits are relying on revenue from the sales of services or programs, rather than straight charitable donations.
- There has been an increase in nonprofit – for-profit collaborations and partnerships.
- Nonprofits have to meet strict governance standards, including state and federal reporting.
How to we create a social enterprise?
There is not a single business structure that you must use to set up a social enterprise — there are many options. You may consider setting up a limited liability company (LLC), a traditional corporation, or a benefit corporation. Sometimes your social enterprise may be best served with a traditional nonprofit corporation structure, as well.
We help you decide the best format for your organization – which may be a for-profit corporation, a benefit corporation, an L3C, a traditional nonprofit, or a combination of these.
- For-Profit Entity (traditional corporation or limited liability company). This form may be preferred by capital investors or by organizations who are raising initial funds from contributors who expect a return on their investment.
- Nonprofit, Tax-Exempt Entity. This form may be preferred if the organization serves a community need directly. It may not be appropriate for a business that is commercial in nature (shop, sale of product). This may be preferred by organizations who will be seeking charitable contributions from the community.
- Hybrids — a Nonprofit and a For-Profit Working Together. There are several ways to help these entities work together to achieve an overall objective.
- Benefit Corporations & Low-profit Limited Liability Companies (L3Cs). These new corporate forms are available in certain states. What is an L3C? and What is a B Corp? What is a Benefit Corporation?.
Here are some steps to consider in setting up a social enterprise:
- Create a plan. What are you setting up and why? Who will benefit from this? What are your anticipated sources of funding? Who are your leaders?
- Gather a team of professionals. Attorneys well versed in social enterprises can help you navigate this new landscape.
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How are social enterprises different from regular businesses?
The Social Enterprise Alliance shares helpful information about the social enterprise sector.
“Social enterprises are businesses whose primary purpose is the common good.
“They use the methods and disciplines of business and the power of the marketplace to advance their social, environmental and human justice agendas.
“Three characteristics distinguish a social enterprise from other types of businesses, nonprofits and government agencies:
- It directly addresses an intractable social need and serves the common good, either through its products and services or through the number of disadvantaged people it employs.
- Its commercial activity is a strong revenue driver, whether a significant earned income stream within a nonprofit’s mixed revenue portfolio, or a for profit enterprise.
- The common good is its primary purpose, literally “baked into” the organization’s DNA, and trumping all others.”
— Social Enterprise Alliance
In addition to leading this Texas social enterprise law firm, Mollie Cullinane also teaches “Social Entrepreneurship” at Texas Lutheran University. Attorney Jeff Cullinane sets up and manages socially responsible businesses and social enterprises across the country.