I recently came across a LinkedIn question asking about entity selection for a social enterprise. The generic question for a generic business is what people often conceive of as an “easy question” with a simple answer.
Here’s my answer:
Laura, the question you ask is only properly answered in light of more important questions. I’ve posed many of these in my article on social enterprises linked below.
As I tell all my clients starting organizations, you need to start with your goals and business model. (And trust me, every organization has a business model — what comes in, what you do with it, what goes out, and what you do with what’s left over.)
So start by defining what you want to do, on a day to day and big picture basis. Then, you take that description and give it to someone like me, a corporate lawyer, and you can get a specific recommendation that fits your particular circumstances. Those circumstances include the state you’re in, tax considerations, financing matters, distributing surpluses (e.g., profits), and control issues.
I’m very good at what I do, but I can’t give you a specific answer without knowing what your vision is and then sorting through your goals. No one can.
Of course, the answer is the same for every other generic business — there’s no way to properly answer the question without knowing all the details. I can tell you the basic model for a VC-financed tech startup, but I can’t advise you that it’s the right structure for you and your company. Until you get properly customized advice, your choices are to ignore the complexities or to use these sorts of answers to learn how to make a decision.
What areas of the law do you think should have more generic advice? Are there any fields where an 80% solution really works best for a lot of people? What about special needs trusts (an area I’m working myself into in the very near future)?