Many start-ups begin because the founders want to make a difference. This social benefit often makes a non-profit seem like an appealing path. At the same time, many founders become disheartened when they find it difficult to raise capital when their venture is entirely focused on a social mission. It doesn’t have to be a matter of choosing between revenue generation or strict adherence to a mission.
Minnesota is one of 31 states that have adopted an alternative to the traditional difficult decision between organizing as a non-profit or for-profit entity. Each state has that has adopted this structure has passed it in a slightly different manner. There are three distinct commonalities in every state that recognizes a benefit corporation:
Advantages of organizing as a benefit corporation include:
Some cons of incorporating as a benefit corporation include:
While benefit corporations are still young, it seems the most successful ones have reincorporated as benefit corporations after gaining success as a traditional corporate entity. For an example, see Method Products, PBC.
Thinking about forming a benefit corporation? Loop Legal offers services to entrepreneurs built on an innovative pricing model to help start-ups through the most important junctures of their operations. Contact us today to learn more about whether you should organize as a benefit corporation.