A: Not yet

I know, I know, this is not a lawyerly answer. But it’s an honest one. Social entrepreneurs with whom I meet are trying to choose the ‘best’ legal form, but the problem is: they are often choosing too early in the development of their social entrepreneurial idea.

I love social entrepreneurial ideas because they challenge conventions and break new ground. But when social entrepreneurs choose a legal form too early, their idea inevitably develops in a more constrained manner – growing to fit the form, rather than the form fitting the vision. Choosing a non-profit or for-profit form early on inevitably limits how the vision is defined and viewed and hampers an idea’s potential.

So here is what I tell social entrepreneurs in deciding on a legal form:

  1. Define your mission and vision coherently.
  2. Determine how your mission and vision will be implemented. What will the programs or operations look like?
  3. Forecast a financial model, particularly focusing on who will funding your organization in addition to determining who will be receiving your organization’s money.
  4. Pilot your project.
  5. Revise your mission/vision, program/operations, and financial model

Five steps later, you should be able to present your concept to a lawyer who can then craft a legal form to fit your needs, as lawyers do in the corporate world. (I emphasize that ‘you should be able to’ because the legal profession is behind in serving social enterprises, and that is a topic for another time.)

In the meantime, know that there is not necessarily a right or wrong choice for form. Legal forms are fluid; they can change.

Most importantly, the choice of a legal form is not an end in and of itself and does not automatically legitimize and implement an idea. Formal incorporation is just a strategic tool to maximize one’s goals and outcomes.