In Washington State, social entrepreneurs have a new option for incorporation. Beginning June 7, 2012, you can now designate yourself a social purpose corporation.
I’ve been looking into this designation for my own incorporation, and thought I’d share my findings, since the information is still a little sparse out there.
What is a social purpose corporation?
A social purpose corporation (SPC) is a corporation organized to support a social purpose – including one or more of the following:
- the corporation’s employees, suppliers or customers
- the local, state, national or world community
- the environment
The SPC is a legal corporate form in Washington. The main differences from a C-Corp structure are:
- The directors of an SPC are able to weigh and consider social purposes included in their Articles of Incorporation before making decisions – even if this might result in lower shareholder return. So as a director, you are legally protected if you weigh social and/or environmental impact before economic – allowing you to truly hold your corporation to a triple bottom line.
- The SPC must file a publicly-available Annual Social Purpose Report, which details its social purpose objectives, actions toward those objectives and evaluation of achieving those objectives.
What is the tax structure of a social purpose corporation?
In Washington, an SPC is taxed the same as other corporations. Federally, the IRS initially considers you a C-Corp, but you can elect to be taxed as an S-Corp.
How is it different from a B Corp?
In Washington State, a B Corp designation functions more or less as a third-party certification – much like “Fair Trade” or “USDA Organic” certification. The folks behind B Corp are a non-profit called B Lab – a great organization that has actively fought for legislations like the one that went into effect June 7.
You can find out more about B Lab’s legislation efforts here.
For further information, here are a few sites I found useful:
- Washington Secretary of State Corporations and Charities Division: this is where you find the paperwork to file as an SPC. (Unfortunately you can’t yet file it online.)
- Social Purpose Corporation in Washington State: article written on Avvo by a local attorney
- Social Purpose Corporations Available in Washington: article written by a law firm on iVLG
- The Social Purpose Corporation: article written by an attorney on Startup Law Blog
Please let me know if you find other good resources!