If you want your business to make a profit and make the world a better place, starting a social purpose corporation (SPC) might be right for you. If you’ve never heard of social purpose corporations before, we’ll tell you what they are and how to start your own.
What is a social purpose corporation?
A social purpose corporation is a corporation that can pursue causes for the public benefit but can also make a profit. Currently, only Washington corporations, Florida corporations, and California corporations can register as SPCs.
What’s the difference between social purpose corporations, benefit corporations, and nonprofits?
It’s easy to get confused about the differences between SPCs, benefit corporations, and nonprofits. Here are the basics differences:
Social purpose corporation
• For-profit entity
• Typically contributes to a social or environmental cause, but is not obligated to consider the public benefit in all aspects of the business
• Cannot receive tax-exempt status
• Can issue stock
• Can distribute profits to shareholders
Benefit corporation
• For-profit entity
• Required to pursue the general public benefit in all aspects of their business
• Cannot receive tax-exempt status
• Can issue stock
• Can distribute profits to shareholders
Nonprofit corporation
• Organized for a specific public benefit
• Goal is not to make a profit
• Can apply for tax-exempt status
• Cannot issue stock
• Cannot distribute profits to members and officers
While SPCs and benefit corporations are similar, the basic difference is that benefit corporations have a strict requirement to work towards the public good in every aspect of their business, whereas social purpose corporations have more flexible requirements and may only pursue a public benefit in one aspect of their business. For example, a clothing manufacturer that registers as a social benefit corporation might donate 10% of the clothes it produces to homeless shelters. Unlike a benefit corporation, that social purpose corporation wouldn’t be required to consider the public benefit in other aspects of their business, such as by making their factories environmentally friendly.
Interested in starting a nonprofit? Check out Northwest’s Nonprofit Guide.
How do I form a social purpose corporation?
The process of forming a social purpose corporation is similar to the process of forming a regular for-profit corporation. You’ll need to file Articles of Incorporation with the Secretary of State (or equivalent state agency) and pay a filing fee.
In Washington State, there is a specific form for Articles of Incorporation of a Social Purpose Corporation. However, in Florida and California, you simply use the general state Articles of Incorporation form for for-profit corporations and include the statement, “This is a social purpose corporation,” as well as stating your corporation’s social purpose. For example, “To raise funds for breast cancer research.”