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When should a startup be a social enterprise or non-profit?

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Before you can answer whether your startup should be classified as a social enterprise or a non-profit, you must first make the distinction between the two. There are still many people who use these terms interchangeably, but there are drastic differences.

In simplest terms, a social enterprise is a business that is started to solve a social problem. They can be a non-profit or for-profit entity based on their goals and mission of the company.

 

Social Enterprise

For example, you may have heard of Seventh Generation—it’s essentially a line of environmentally cleaning products. The company was built on social and corporate responsibility. Not only does the company produce chemical-free products for consumers, but they also take a portion of their earnings and donate it back to a variety of non-profits that focus on environmental and social concerns.

While the company is considered “for-profit,” it is still classified as a social enterprise not only for the type of products it sells but the fact that it operates with consideration for social responsibility.

 

Non-Profit

Non-profits differ because these entities are simply designed not to profit from membership fees, donations, or any other type of business that is conducted. The intent of the entity is to focus on a social or cause or simply advocating for a shared view. Any money that is earned is used to fund the function of the non-profit. From an economic standpoint, non-profits are tax-exempt meaning that they don’t have to pay taxes on the money that they receive.

For more informatino about starting a non-profit, check out my blog: How do I Begin a Non-Profit?

As you can see, the stark differences between the two will likely determine which path is most appropriate. For more help, you should consult a business attorney.

 

Contact a Business Attorney

LawTrades may be able to help. We offer the largest platform of freelance attorneys that are fully vetted, highly skilled, and more affordable than traditional lawyers. Check out our website and get in touch if we seem like a good fit!