Blogs

After his seventh trip to Ethiopia, R. Todd Johnson reflects on how well-intentioned philanthropy produces long-term, unintended negative consequences, how the “NGO economy” is “killing” entrepreneurship, and how business can assist in the elimination of extreme poverty.

More and more nonprofits are looking to earned income as a way to generate new revenue. But moving to social enterprise as a revenue source can cause problems with other funding sources and the activities they support. So what to do when these situations threaten to undermine your nonprofit? Here are some alternatives to consider.

Until recently, available corporate forms left entrepreneurs with a simple “either – or” equation. You either adopt a corporate form that maximizes the possibility of doing well, or adopt a corporate form that maximizes doing good. This has been the great legacy of our public policy decisions.

In a word, yes. On April 13, 2010 , the Governor of Maryland signed a law creating a new legal form called a “Benefit” corporation. A few weeks later, Vermont followed suit and passed a similar law. Essentially a business corporation, fully taxed and operated for the benefit of its shareholders, the benefit corporation law also allows the founders to embed a social or public purpose into the corporate charter.

For generations, farmers did not know who purchased their coffee, how it tasted, or if they would sell to the same buyer again. Sustainable Harvest is changing this cycle with the “Relationship Coffee” trade model. Relationship Coffee operates with complete transparency and brings coffee farmers, importers, and roasters together on a level playing field.

Leaders of social enterprises, whether existing or to be formed, often express a profound interest in forming a new “hybrid” entity, ostensibly to solve one of the fundamental problems facing social enterprises today – the ability to build a social enterprise with a combination of grants, donations, and private equity. But really, what is a “hybrid”?

As is often the case, my education in “for-benefit” businesses started on a college campus. And like so many education stories, it started with a group of young and passionate individuals, just crazy enough to give up on all the conventional ideas of success in pursuit of a new ideal.

Is proliferation of legal sites for social entrepreneurs a good thing? And how do you select a pro-bono lawyer? As an antitrust lawyer, David has been trained to believe that competition is good, that it maximizes the allocation of resources and enhances efficiency. But is this happening in the pro bono legal space?

The New York Times recently published an article critical of organizations that use unpaid internships to take advantage of college students and recent graduates. In light of this publicity, how can your social sector organization ensure that you offer meaningful experiences this summer and, more importantly, host unpaid interns legally?

Today’s transportation and communication systems have made international activities easier and more prevalent than ever. Even when one is aware that a transaction is international, it is easy to forget that import and export requirements exist. However, forgetting import and export requirements can result in delays, seizures, and monetary penalties, even for innocent and unknowing mistakes.

There are over 1.5 million nonprofit organizations in the United States, each spending valuable time and resources on operations that are not directly related to their mission. Is there a way for new entities to get the benefits of nonprofit status while avoiding filing for nonprofit status and becoming burdened with the details of financial and organizational management? Fiscal sponsorship may be a viable solution for many new social sector projects.

Today I’d like to introduce a different slant on the question of what legal structures best foster social ventures. Specifically, when launching a new venture, what is the best way to protect the mission?

I recently attended a panel hosted by the Hudson Institute to discuss the implications of Citizens United on nonprofits and democracy. I was struck by the fact that whether the panelists supported or opposed Citizens United, they were not much interested in discussing whether money in politics—the constant need to raise campaign funds-- was corrupting the democratic process and drowning out the voice of the American people.

The desire to combine social and commercial in the pursuit of an outcome has led to creative ways to structure an enterprise—often known as a hybrid model or dual structure, because it combines a nonprofit arm with a for-profit arm. The for-profit allows an enterprise to facilitate investment, while the nonprofit can facilitate grant capital and provide non profit-making services to a community.

On Jan. 21, 2010, the U.S. Supreme Court issued a landmark decision in Citizens United v. Federal Election Commission that may have a dramatic impact on spending for political activities by business corporations and nonprofit 501(c)(4) social welfare organizations, 501(c)(5) labor organizations, and 501(c)(6) trade associations.