Do We Need Specialized Business Forms for Social Enterprise?

Abstract

Legislation enabling social enterprise-specific organizational forms has proliferated around the country. A host of benefit corporations and low profit limited liability companies have organized under these statutes, professing to combine profit-making potential with charitable goals. But companies have long managed social enterprise with traditional forms, and the recent rise of the LLC allows entrepreneurs, as a legal matter, to accomplish all the goals of more specialized social enterprise-specific forms, and more. Is there, then, a need for specialized social enterprise organizational forms? This chapter compares the advantages of these new forms to those of traditional business entities. I show how traditional forms like corporations, nonprofits, and especially LLCs could effectively mimic the goals of modern social enterprise entity statutes. In fact, an LLC-based system is remarkably similar to modern benefit corporation statutes, suggesting those statutes may add little value. However, using LLCs as a comparative foil, I show how benefit corporation statutes could be revised to offer a stronger, more credible commitment to social enterprise than could be replicated with more typical organizational forms.