For-profit or non-profit?

On December 3, 2009, the Philadelphia City Council voted unanimously to pass a bill that creates a new sustainable business tax credit of US$4,000 for B Corporations—certified socially responsible companies (1). The decision could be a sign of what’s to come: new legislation that provides incentives for businesses to operate in a socially beneficial manner.

There are so many variations of us who are doing “ministry,” ethical capitalism, green, organic, fair-trade, eco-capitalism, humanitarian, social  entrepreneurship or just serving customers well.  I’m not sure how much benefit or restriction the legal structures provide – or inhibit.

We’re seeing some new categories emerging around the world.  In the UK, the “Community Interest Company” (CIC) enables an organizer to run a business for the benefit of the community rather than for the benefit of the owners of the company. In the US, the latest innovation is the low-profit, limited liability company or L3C, which simplifies compliance with IRS rules for yet another hybrid structure.

I met Tom Szacky recently – founder of TerraCycle – what an exciting business.   Totally for-profit, yet they are changing the world in the way we view “trash” and they’re raising millions for charities.  I think we’re seeing a positive correction from the American corporations that have been raping their communities and customers.  The internet has made everyone more transparent with fewer opportunities to hide behind skanky business practices.

Bottom line – I think the legal structure we choose is less important than having a worthy mission to fulfill.  Your mission will drive how you do business, regardless of what’s in your corporate charter paperwork.