Why The Corporate Form Is Structured As A For Profit Organization Essay

Why The Corporate Form Is Structured As A For Profit Organization Essay

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To adequately address the nature of our enterprise, ensure returns for investors, and remain loyal to our mission, the corporate form is structured as a for-profit C corporation. We think this form is the most conducive to our mission and goals due to the focus on sustainability, profit margins, and the flexibility for exit options. Moreover, we have several structural and legal mechanisms in place to prevent mission drift, despite being a for-profit organization.
A. C Corporation
Structuring CBAUI as a New York C Corporation would allow us to focus our efforts on both sides of the business, and integrate them to ensure the longevity of the business model. It would also give us a predictable tax structure that would be easier to comply with as a new organization. We considered other corporate forms, but realized that these forms would not allow us to raise capital at a fast enough rate for the growth that we project, especially with respect to our international expansion. New York provides the option of including a constituency statute in the articles of incorporation, which would work towards preventing mission creep. Registering CBAUI in New York also gives us the option to possibly convert the business to a public benefit corporation in the future, after some precedent has been created for that corporate form.
B. Benefits and Disadvantages
There are several corporate forms to choose from to meet the needs of social enterprises. There are three that we considered in our determination of which corporate form best fit our mission, goals and possible outcomes. Although we ultimately chose a C Corporation structure, the other corporate forms also offered several advantages, which we will discuss below.
1. Hybrid
Due to the grad...

... middle of paper ...

... (L3C)
The option of registering as a L3C is not currently available in the state of New York, which means CBAUI would need to incorporate in another state to take advantage of this corporate form. As a fairly new structure nationally, L3C may cause investors to be wary of the legal ramifications of investing in our enterprise. There is not a substantive body of case law for this corporate form due to its novelty, and currently the regulatory structure surrounding this corporate form is fairly nonexistent at both the state and federal level. The United States Internal Revenue Service (IRS) has yet to issue an opinion on the tax treatment of these corporations. The novelty of this form along with the risk for significant unforeseen regulatory costs in the future were sufficient reasons for us to look to the New York C Corporation structure for CBAUI’s corporate form.

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