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A panel presentation for NC AFP Conference - session 1 of 2 focused on legal forms of social enterprises.
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A panel discussion with Marty Martin of the Martin Law Firm, Dan Moore of the
Redwoods Group and Jeff Stern of TROSAAugust 11, 2011
Session One: What is Social Enterprise ?
Social Enterprise: Expanding Philanthropy's Boundaries
Session One: What is Social Enterprise?
Session Two will cover information on how to become a social enterprise
DefininDefining the g the terms terms
we usewe use
DefininDefining the g the Legal Legal FormsForms
Panel Panel
DiscussDiscussionion
Social Enterprise: an organization or venture that achieves its primary social or environmental mission using business methods.
Definition from the Social Enterprise Alliance
Social Enterprise is a subset of social entrepreneurship.
Social Entrepreneurship includes:•Social Innovation•Corporate Social Responsibility (CSR)•Socially Responsible Investing •Triple Bottom Line •Venture Philanthropy •Direct service and advocacy groups•Blended value organizations in various legal structuresAnd maybe even things like cause-related marketing
What we talk about when we talk about SE
“We look for organizations or ventures who have a primary orientation or mission of achieving a measurable social benefit and a market-based approach toward generating revenue. Most often these organizations have a nonprofit status, a clear theory of change and a commitment to transparency.”
- Social Enterprise Network of the Triangle more info available at http://www.se-triangle.org
Social Enterprise is not:
Social Enterprise is:•Creating sustainable revenue streams to support mission•Engaging market forces in pursuit of social impact•Devising new ways to leverage existing assets •Decreasing dependence on the external funding community•Utilization of business methods, tools and discipline
• Traditional fundraising
• Grant money• Gifts/donations• A “quick fix” in a
time of a crisis • For everyone
Defining the legal forms
Is this legal? Even for nonprofits? And what is an L3C anyway?
Legal forms and related implications
Ownership Stakeholders Tax status Risk Capital
Organizational Entities
• Proprietorship• Partnership• Unincorporated Associations• Corporations
– Business (C & S) – Nonprofit– Hybrid (Benefit -NC pending)
• LLC– L3C
Corporations and LLC
• Lawful business or activity• Business Judgment rule• General powers
– Donations– Government policy– Payment or donation
Exempt Organization
• Organized and operated exclusively• Limited statutory purposes• No inurement or private benefit• Limited lobbying and no political activities
Exempt Organizations and related organizations
• Unrelated Business Income • Charitable• Control• Cash
Foundation PRI and L3C
• Charitable purposes• No significant purpose – income or capital
appreciation• No legislative or lobbying• Taxable
Social Responsibility of Organizations
• “The issue of social responsibility is also inherent in the society of organizations.”
• “Every organization must assume full responsibility for its impact on employees, the environment, customers and whomever and whatever it touches. That is social responsibility.”
Peter Drucker
Panel Discussion: Questions? Comments? Ideas?
If you don’t come forward with questions, we’ll give you a few examples…
DiscussDiscussion ion
time!time!
Additional ResourcesSocial Enterprise Database:
http://www.communitywealth.com/Directory%20of%20Social%20Enterprises.htm
CASE (Center for the Advancement of Social Entrepreneurship): www.caseatduke.org
SocialEdge: www.socialedge.orgSocial Enterprise Alliance: www.se-alliance.orgREDF: www.redf.org/learn-from-redfStanford Social Innovation Review: http://www.ssireview.org/NC Fourth Sector Cluster Initiative:
http://www.fourthsectornc.orgSocial Enterprise Network of the Triangle (SENT):
http://www.se-triangle.org
Thanks for your time today. If you want to get in touch:
Jeff Sternhttp://www.jeffstern.org will have links to this presentation on slideshare plus my email, twitter, etc. Email me at TROSA using [email protected] or seehttp://www.trosainc.org
Marty Martin, JD MPAMartin Law Firm, Counsel for Nonprofit, Tax-exempt and Social Enterprise OrganizationsMarty_Martin@martinlegalhelp.comwww.martinlegalhelp.comBlog: thenonprofitmentor.com
Dan MooreThe Redwoods Group Chief Marketing Officer [email protected]://www.redwoodsgroup.com/Blog: http://blog.redwoodsgroup.com/The Redwoods Group – Serve Others
Really? No more questions?
In that case, we have a few examples of social enterprises for you…
Juma Ventures develops and operates concessions at stadiums for the purpose of providing job opportunities to economically disadvantaged teens.
The Women’s Bean Project in Denver employs women from backgrounds of chronic unemployment and poverty to manufacture gourmet foods. The project does not hire women to make and sell bean products. It makes and sells bean products to hire women.
A few examples of successful social enterprise
More examples, closer to home:
• TROSA runs several social enterprises (moving, lawn care, furniture and frame shop, grocery and more) in pursuit of its mission to enable substance abusers to be productive, recovering individuals by providing comprehensive treatment, work-based vocational training, education, and care.
• The Scrap Exchange runs a creative re-use store and education programs in pursuit of its mission to promote creativity, environmental awareness, and community through reuse.
• Extraordinary Ventures employs young men and women with autism and other developmental disabilities. They create jobs through conference center rental and laundry services.
More local examples, but not nonprofit:
• The Redwoods Group sells commercial specialty insurance to camp programs, particularly focusing on YMCA and JCC camps. Their social mission is baked into their articles of incorporation and in the past they’ve taken a loss rather than lay off employees or drop their less profitable customers.
• TS Designs in Burlington makes custom T-shirts and runs the company on a triple-bottom-line basis, with organic, recycled and locally produced options.
• Bountiful Backyards is a community-based enterprise that uses the profits from its edible landscaping business to create community gardens and educate people about sustainable agriculture.
Characteristics of a successful social enterprise:
Source: Community Wealth Ventures - Powering Social Change
Remember the old saying:“One man’s trash is another man’s treasure”
Be creative in thinking about your undiscovered assets!
Yes, it’s legal, and it can take many forms:
Nonprofits can launch and operate a social enterprise and maintain 501(c)(3) tax status
Income Related to Exempt Purposes• Must be substantially related to exempt purposes• No limit on amount of revenue
Income from Unrelated Activities • Not substantially related to exempt purposes• Produces unrelated business taxable income (UBTI)• If less than 10-15% of budget, okay• If more, consider moving activity outside of nonprofit entity
There is no standard legal structure
While there is no standard form, a few options include:
Nonprofit with 501(c)(3) tax status Traditional for-profit structures including LLC,
S-Corp, etc L3C B-Corp Benefit Corporation