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A social purpose corporation (SPC) is a type of for-profit entity, a corporation, in some U.S. states that enables, but does not require, considering social or environmental issues in decision making. SPCs are similar to benefit corporations (B corporations).
In California, "[t]he amendment, S.B. 1301, changes existing law (found under Corporations Code Sections 2500–3503) [1] to emphasize the social-purpose nature of the flexible purpose corporations, most notably by changing its name to the "Social Purpose Corporation". With the law change, corporate directors are now required to account for company mission in decision making. A SPC must state that it has a specific purpose to pursue a public purpose that a traditional nonprofit corporation would normally have pursued. Because an SPC is a for-profit organization, they do not qualify for tax-exempt status as a nonprofit corporation. [2]
 | Parts of this article (those related to FPC conversion to SPC) need to be updated.(December 2018) |
S.B. 1301 took effect on January 1, 2015. On that date, extant FPCs automatically continued their existence as SPCs. [3]
Florida created both social purpose corporations and benefit corporations in 2014. [4] The main difference between the two is that B corporations must pursue a "general public benefit", which applies to all of the company's activities, while SPCs may pursue a public benefit in limited areas. [5] This example from the Florida Bar Journal illustrates this difference between SPCs and benefit corporations:
Suppose that a for-profit corporation plans to manufacture and sell an anti-malarial drug and, as part of its business plan, will distribute that drug at low or no cost in African countries. If distribution in Africa is the corporation's sole benefit purpose, the corporation could appropriately be a SP corporation. However, if the corporation is a B corporation, directors and officers would be mandated to consider as well employee programs, environmental concerns, community issues, and similar societal factors, and cannot concentrate on a single benefit program to the detriment of other general benefit concerns. [5]
Shareholders, directors, and persons owning more than 5% equity in a Florida SPC may bring lawsuits against a Florida SPC for failure to pursue or create a public benefit, [6] but the corporations, their directors, and their management are shielded from monetary damages in such lawsuits for failing to create a public benefit. Florida SPCs must prepare an annual report on the company's achievements towards its public benefit goals, but unlike Florida B Corporations, these reports do not need to be assessed by a third-party standard. [5]
Washington State passed the law for social purpose corporations in 2012. [7] Florida became the second state to adopt social purpose corporations in 2014. [8] Although there are no official requirements for social purpose corporations to have a positive social or environmental impact, most of the companies which have registered as social purpose corporations in Washington State, the pioneering state for SPCs, have a focus on social or environmental impacts. [9]
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A nonprofit organization (NPO), also known as a nonbusiness entity or nonprofit institution, and often referred to simply as a nonprofit, is a legal entity organized and operated for a collective, public or social benefit, as opposed to an entity that operates as a business aiming to generate a profit for its owners. A nonprofit is subject to the non-distribution constraint: any revenues that exceed expenses must be committed to the organization's purpose, not taken by private parties. An array of organizations are nonprofit, including some political organizations, schools, business associations, churches, social clubs, and consumer cooperatives. Nonprofit entities may seek approval from governments to be tax-exempt, and some may also qualify to receive tax-deductible contributions, but an entity may incorporate as a nonprofit entity without having tax-exempt status.
A limited liability company (LLC) is the United States-specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. An LLC is not a corporation under the laws of every state; it is a legal form of a company that provides limited liability to its owners in many jurisdictions. LLCs are well known for the flexibility that they provide to business owners; depending on the situation, an LLC may elect to use corporate tax rules instead of being treated as a partnership, and, under certain circumstances, LLCs may be organized as not-for-profit. In certain U.S. states, businesses that provide professional services requiring a state professional license, such as legal or medical services, may not be allowed to form an LLC but may be required to form a similar entity called a professional limited liability company (PLLC).
A joint-stock company (JSC) is a business entity in which shares of the company's stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares. Shareholders are able to transfer their shares to others without any effects to the continued existence of the company.
A foundation is a type of nonprofit organization or charitable trust that usually provides funding and support to other charitable organizations through grants, while also potentially participating directly in charitable activities. Foundations encompass public charitable foundations, like community foundations, and private foundations, which are often endowed by an individual or family. Nevertheless, the term "foundation" might also be adopted by organizations not primarily engaged in public grantmaking.
A charitable organization or charity is an organization whose primary objectives are philanthropy and social well-being.
United States non-profit laws relate to taxation, the special problems of an organization which does not have profit as its primary motivation, and prevention of charitable fraud. Some non-profit organizations can broadly be described as "charities" — like the American Red Cross. Some are strictly for the private benefit of the members — like country clubs, or condominium associations. Others fall somewhere in between — like labor unions, chambers of commerce, or cooperative electric companies. Each presents unique legal issues.
A non-profit hospital is a hospital that does not make profits for owners of the hospital from the funds collected for patient services. The owners of non-profit hospitals are often a charitable organization or non-profit corporations. Fees for service above the cost of service are reinvested in the hospital. Other funding types for hospitals include public hospitals and for-profit hospitals.
A 501(c) organization is a nonprofit organization in the federal law of the United States according to Internal Revenue Code and is one of over 29 types of nonprofit organizations exempt from some federal income taxes. Sections 503 through 505 set out the requirements for obtaining such exemptions. Many states refer to Section 501(c) for definitions of organizations exempt from state taxation as well. 501(c) organizations can receive unlimited contributions from individuals, corporations, and unions.
A nonprofit corporation is any legal entity which has been incorporated under the law of its jurisdiction for purposes other than making profits for its owners or shareholders. Depending on the laws of the jurisdiction, a nonprofit corporation may seek official recognition as such, and may be taxed differently from for-profit corporations, and treated differently in other ways.
Laws regulating nonprofit organizations, nonprofit corporations, non-governmental organizations, and voluntary associations vary in different jurisdictions. They all play a critical role in addressing social, economic, and environmental issues. These organizations operate under specific legal frameworks that are regulated by the respective jurisdictions in which they operate.
A non-stock corporation is a corporation that does not have owners represented by shares of stock, in contrast to a joint-stock company. A non-stock corporation typically has members who are the functional equivalent of shareholders in a stock corporation. The members may have the right to vote based on the bylaws of the corporation. Non-stock corporations may also choose to have no members.
A for-profit corporation is an organization which aims to earn profit through its operations and is concerned with its own interests, rather than the interests of the public.
A foundation in the United States is a type of charitable organization. However, the Internal Revenue Code distinguishes between private foundations and public charities. Private foundations have more restrictions and fewer tax benefits than public charities like community foundations.
A religious corporation is a type of religious non-profit organization, which has been incorporated under the law. Often these types of corporations are recognized under the law on a subnational level, for instance by a state or province government. The government agency responsible for regulating such corporations is usually the official holder of records, for instance, the Secretary of State. In the United States, religious corporations are formed like all other nonprofit corporations by filing articles of incorporation with the state. Religious corporation articles need to have the standard tax-exempt language the IRS requires. Religious corporations are permitted to designate a person to act in the capacity of corporation sole. This is a person who acts as the official holder of the title on the property, etc.
A mutual-benefit nonprofit corporation or membership corporation is a type of nonprofit corporation in the US, similar to other mutual benefit organizations found in some of common law nations, chartered by government with a mandate to serve the mutual benefit of its members.
A low-profit limited liability company (L3C) is a legal form of business entity in the United States. Commonly referred to as a hybrid structure, it has characteristics of both for-profit and non-profit entities. L3Cs were created to comply with the Internal Revenue Service (IRS) program-related investments (PRIs) rules which allow most typically private foundations the ability to maintain tax-exempt status through investments in qualifying businesses and/or charities. With a social mission as the primary objective and a secondary objective of profit generation, the L3C legal form is considered a viable option for businesses seeking a reputation or marketability for being a social enterprise.
A flexible purpose corporation (FPC) was a class of corporation in California lacking a profit motive when pursuing a social benefit defined in its charter. A flexible purpose corporation differed from a Benefit corporation in that it targeted for-profit entities seeking traditional capital market investment. The classification was first created in 2012 and was retired in 2015 via legislation in favor of the social purpose corporation (SPC) classification, with existing FPCs continuing their existence as SPCs.
A charitable for-profit entity is an organization with a charitable mission but legally organized as a for-profit corporation. Both benefit corporations and Low-profit limited liability companies (L3C) fall under this category. As well as generating a profit, a charitable for-profit entity concentrates on setting a social objective. The business must achieve its social purpose, as well as make a profit, to be successful. There are movements to refine strategies, retuning community-oriented activities based on ROI of Little Investment or Small Capital, Low Risk, yet, higher return and rebranding nonprofit entities from wholly-dependable funding beneficiary from Governments or public i.e. business organization or individual. previously, we often heard of Nonprofits and community-based organizations, now, For-profits community-based Social Enterprises The case of organizing charitable work under for-profit rules rather than as a traditional charity such as a foundation gained prominence when Google announced its Google.org branch in 2006. Since then, the subject has been under both academic and public debate with U.S. law professor Eric Posner arguing in favor of expanding Charity law to include for-profit charities, while Brian Galle considered the legislative popularity of social enterprises a "race to the bottom among states competing to siphon away federal tax dollars for local businesses."
In business, and only in United States corporate law, a benefit corporation is a type of for-profit corporate entity whose goals include making a positive impact on society. Laws concerning conventional corporations typically do not define the "best interest of the corporation", which has led some to believe that increasing shareholder value is the only overarching or compelling interest of a corporation. Benefit corporations explicitly specify that profit is not their only goal. Their activities may or may not differ much from traditional corporations. An ordinary corporation may change to a benefit corporation merely by stating in its approved corporate bylaws that it is a benefit corporation.