Q: How do I start a SPC (social purpose corporation) in Washington State?
Thank you to Shirwa Muse at Miscellaneous Muse LLC for that great question! Washington state is one of three states that allows a corporation to form as a Social Purpose Corporation, which is a corporation that benefits the public in some aspects of the business but can also make a profit. The process for starting an SPC in Washington State is pretty much the same as starting any other type of corporation—file Articles of Incorporation and pay a filing fee. We’ll go over the steps to starting an SPC or converting your corporation or LLC to an SPC.
Start a new SPC in Washington
Starting a new corporation is the easiest way to start a Social Purpose Corporation (SPC) in Washington. The process is similar to filing for a regular Washington corporation. The only real difference is the paperwork you file.
Step 1: Name Your Business
To start your Social Purpose Corporation, first check that your business name is available. You can do this through the Washington Secretary of State’s corporation name search tool. In Washington, SPC business names must:
- Be unique in the state
- Not include misleading information, like “charity” or “bank”
- Include an entity signifier like SPC, S.P.C., or Social Purpose Corporation (the default will be SPC if you do not choose one)
If you want to make sure your business name is available, you can submit a Name Reservation Application with the Washington Secretary of State and pay $30 to reserve your business name. The name reservation is good for 180 days. (Keep in mind that a business name is only yours after the Secretary of State approves it.)
Step 2: File Formation Documents
You must file Articles of Incorporation of a Social Purpose Corporation (RCW 23B) in order to incorporate as an SPC. Your articles include:
- Unified Business Identifier (UBI)
- Entity name
- Purpose of the corporation (including specific social purposes)
- Registered agent information
- Period of duration (the default will be perpetual duration)
- Effective date
- Corporate shares
- Incorporator information
It costs $180 to file your Articles of Incorporation (SPC). You can also pay an additional $50 to expedite the filing–just make sure that you mark the box indicating expedited services on the application.
Step 3: Submit SPC Initial Report
All corporations, including Social Purpose Corporations, must file an Initial Report to the Washington Secretary of State within 160 days of incorporation. This costs $10 to file, but you can expedite the process for an additional $50 if you want.
Many businesses choose to include their Initial Report with their formation paperwork to make the process a little easier.
Convert a corporation to a SPC in Washington
To convert from a regular for-profit corporation to a Social Purpose Corporation, there are two options:
- draft and file Articles of Conversion and Articles of Incorporation of a Social Purpose Corporation
- file Articles of Amendment of a Profit Corporation with the Washington Secretary of State
Not every corporation can just file the amendment, though most regular for-profit corporations can. Unfortunately, there’s no cut-and-dry way of knowing for sure except for contacting the Washington Secretary of State. A representative can look your business up by its UBI to see if the registration allows for an amendment or if you need to draft Articles of Conversion. (Pro-tip: use the Washington Secretary of State’s online live chat tool for a usually-much-faster customer service experience than calling in.)
Option 1: Filing the Articles of Conversion and the Articles of Incorporation
The Articles of Incorporation of a Social Purpose Corporation (RCW 23B) is the same for a new business as it is for a conversion—you can fill this out and submit it alongside your Articles of Conversion. There is no form provided by Washington for the Articles of Conversion. This must be self-drafted according to the state statutes for Corporation Conversion: RCW 23B.09.010.
We recommend checking with an attorney or your business’ legal team before drafting your Articles from scratch.
To file this way, submit both the Articles of Conversion and Articles of Incorporation alongside your $190 filing fee via check or money order.
Option 2: File the Articles of Amendment and Supplemental Materials
The Articles of Amendment of a Profit Corporation allows you to update the Secretary of State about changes in your business. One of these changes includes changing from a regular corporation to an SPC.
Fill out your regular business information, like your UBI, business name, registered agent, etc., and just make sure that you select Social Purpose Corporation as your new business type. The Articles of Amendment costs $30 to file.
Per RCW 23B.25.040, you’ll need to give the Secretary of State a supplemental document that includes:
- Business entity identifier (SPC, S.P.C., or Social Purpose Corporation)
- General social purpose (or purposes) that the business will be pursuing
- A provision that states the following: “The mission of this social purpose corporation is not necessarily compatible with and may be contrary to maximizing profits and earnings for shareholders, or maximizing shareholder value in any sale, merger, acquisition, or other similar actions of the corporation.”
You can also include a Cover Sheet for Conversion of Business Entity. This is no additional charge to file and it’s not mandatory, but the cover sheet sometimes helps expedite the filing process.
The state might request additional documents, such as a written guarantee that you’ll update the shareholders on your social purpose’s progress, but usually this can be put in your amended corporate bylaws.
You don’t need to include your original Articles of Incorporation, as the Secretary of State will already have these on file.
Convert an LLC to a SPC in Washington
To convert your LLC to a SPC, you’ll need to file Articles of Conversion and Articles of Incorporation for a Social Purpose Corporation. Since the Washington Secretary of State does not supply a form for your Articles of Conversion, make sure that you take a close look (and maybe with a trusted attorney at your side also looking) at the state’s LLC conversion statute, RCW 25.15.436. The Articles of Conversion are self-drafted, so you’ll want to be thorough and consult other legal forms (like the Articles of Incorporation!) to make sure you’re not missing anything.
To file this way, submit both articles alongside your $190 filing fee via check or money order.
So you’ve converted… now what?
Once you’re officially approved as an SPC, you’ll probably realize that you need to make more adjustments than just the legal change. After all, you’ve got a mission now, a purpose—you’ll want to make sure the business’ materials reflect this new-found social purpose. This means you’ll need to change your corporate bylaws and marketing materials.
For example, if your corporation is a ceramics shop that is now donating 20% of profit to underfunded school art programs, you’ll need to have a process in place for how to choose that school and how frequently you donate. You’ll also want to get word out to your customers about this change, whether that’s a banner on your website or an update in your business card. You’re doing good in the world—it’s okay to brag about it a little bit.
FAQs
Have more questions? Check out our most frequently asked questions about SPCs in Washington below!
How is a SPC different from a nonprofit?
A SPC is a for-profit company that both makes profit and prioritizes public benefit or charity in some part of the business. So, like a clothing company that donates unsold items to a shelter for the unhoused or a restaurant that gives back a percentage of their proceeds to a soup kitchen. This is different from a nonprofit because the SPC can still prioritize making a profit in some or most aspects of the business, and they can sell stock. A nonprofit is organized exclusively for the public’s benefit and can apply for tax-exempt status.
How is a SPC different from a benefit corp?
Incredible question. Both are for-profit technically and both help out the world. So why choose one over the other? Basically, an SPC contributes to some sort of cause, but only in some aspects. There can be one product line that donates profits to LGBTQ youth and one line that sends the profits straight to the shareholders. A benefit corporation does send profit to the shareholders, but all aspects of their business must be focused on their social cause or purpose.
Can I apply for tax-exempt status for my SPC?
No. Unlike non-profit corporations, SPCs still prioritize making profit. This means that SPCs don’t qualify as for 501(c)(3) tax exempt status with the IRS.
How do I make changes to my SPC?
Just like a for-profit corporation, you file paperwork to make changes to your business. File Articles of Amendment of a Social Purpose Corporation in order to change your business type, your business name, your registered agent, or any other information originally included in your Articles of Incorporation.