Social Entrepreneurs – Dickinson Law's Inside Entrepreneurship Law Blog

Entrepreneur from History | Walt Disney – America’s Pioneer of Animation

by Cassidy Eckrote

There are very few pop culture interests shared among people all over the world and of all ages. Whether you live in Hong Kong or America, are two years-old or ninety-two years old, you would be hard-pressed to find someone who hasn’t heard of Disney. If you ask five different people the first thing they think of when they hear the word “Disney,” you’d likely hear five different answers: movies, amusement parks, streaming services, Mickey Mouse, or maybe even the Happiest Place on Earth. However, none of these experiences would have been possible without the person behind the magic—Walter Elias Disney.

Early life

Walt Disney was born on December 5, 1901, in Chicago, Illinois. Despite the empire he left behind, Disney came from humble beginnings. He was one of five children and had his first job at eight years old as a paperboy. Disney dropped out of school at age 16 and joined the American Red Cross where he drove an ambulance in France during World War I.

Once the war was over, Disney returned home and began taking classes at the Kansas Art Institute. His talent and passion for animation continued to grow. In 1922, Disney started his first business—a film studio called Laugh-O-Gram. However, Disney was an inexperienced businessman and the studio faced financial troubles. After just one year, Laugh-O-Gram Studios went bankrupt and closed.

persistence

In 1924, Disney partnered up with his brother Roy to open the Disney Brothers Studio, now known as The Walt Disney Company. There, he created a short series called Oswald the Lucky Rabbit. Despite the series’ success, the character was not copyrighted under Disney’s name, and he lost the rights to his work. His distributor, who owned the rights to Oswald, opened his own studio and recruited Disney’s animators to work for him.

Having just lost his team of animators and first successful character, Disney continued to persist and created the iconic Mickey Mouse. After Mickey’s debut in a couple of silent cartoons, Disney decided to do something that hadn’t been done before. He created one of the first cartoons with synchronized sound, a short film titled Steamboat Willie. It was then that Mickey Mouse rose to stardom. Not only did Disney create Mickey Mouse, but he was the voice of the character until 1947.

“If you can dream it, you can do it.” Walt Disney

Expanding the empire

As Mickey Mouse’s popularity grew, so did the Disney brand. Disney expanded his character base, creating Donald Duck, Pluto, and Goofy to coincide in Mickey’s world. But he didn’t stop there. In 1937, amid the Great Depression, Disney created his first full-length animated film, Snow White and the Seven Dwarfs. He then went on to create more classic movies, such as Dumbo and Bambi.

To fund the company’s rapid growth, Disney began selling over-the-counter stock in 1940 for $5 per share. On November 12, 1957, Walt Disney Productions undertook its initial public offering on the New York Stock Exchange. At that time, investors could purchase a share of the company for $13.88. Today, a share of The Walt Disney Company sells for $109.54.

Walt Disney didn’t limit himself to creating movies about flying elephants and singing birds. During World War II, the federal government retained Disney to create films that would educate the public about the war. One of those short films, The New Spirit, starred Donald Duck and encouraged people to pay their income taxes as a way to fund the war.

Walt Disney was a man who wore many hats. He was not only a businessman and entrepreneur, but he was a husband and father. Disney and his family would often visit amusement parks and were unsatisfied with the cleanliness of the parks and the unfriendly staff. He knew he could make it better. The first Disneyland theme park opened in California in 1955, and it was unlike any other amusement park. Disney’s attention to detail set him apart from competitors—even the trash cans were designed to match the theme of the park.

In 1965, Walt Disney began designing Disney World, a theme park located in Orlando, Florida. However, Disney died in 1966 prior to the opening of the new park. Disney’s business partner and brother, Roy, carried out his plans, and Magic Kingdom opened in 1971. To date, there are twelve Disney parks in six locations worldwide.

“It’s kind of fun to do the impossible.” Walt Disney

What started out as a man with a dream turned into a company worth $200.10 billion. The Walt Disney Company has become one of the most well-known and respected entertainment moguls in the 21st century. The Disney phenomenon is so prevalent in today’s culture that adult members of the fandom are widely referred to as “Disney Adults.” Next time you visit the Happiest Place on Earth, don’t forget to snap a photo by the statue of the men who started it all—Walt Disney and Mickey Mouse.

Cassidy Eckrote, at the time of this post, is a third-year law student at Penn State Dickinson Law. She has a B.S. in Business from Penn State University. Cassidy currently serves as a Comments Editor on the Dickinson Law Review. Upon graduation, Cassidy will work as a law clerk in the Southern District of Florida.

Sources:

https://www.goldmansachs.com/our-firm/history/moments/1957-disney-ipo.html#:~:text=Although%20Disney%20issued%20over%2Dthe,the%20New%20York%20Stock%20Exchange.

https://www.britannica.com/biography/Walt-Disney/Legacy

https://www.history.com/news/7-things-you-might-not-know-about-walt-disney

https://www.entrepreneur.com/growing-a-business/walter-elias-disney/197528

https://www.imdb.com/name/nm0000370/bio

https://web.archive.org/web/20160421084237/https://d23.com/about-walt-disney/

Entrepreneurs and Attorneys: Communication in the Midst of High Stakes

By: Anne Horissian

As attorneys, effective communication with a client, or lack thereof, can make a huge difference in representation. In my experience as a law student interning in public interest law, the recognition that clients are often experiencing trauma in their lives when they seek legal counsel is important when approaching their cases. A client’s mental health and emotional state can be key pieces to the puzzle of representation, and can particularly impact communication. However, this dynamic is not limited to tumultuous custody battles or contentious divorces. Anytime a person is experiencing stress, it can be expected that such stress will impact their ability to articulate and understand communications.

An article titled Communication Under Stress explains, “The process of forming speech is actually quite complex…while this process is generally smooth under normal circumstances, stress and duress can significantly interfere with the process… When it comes to getting your words out and even how you interpret the words of others, your mental and emotional state is quite significant.” Put simply, stress complicates communication.

Although a hyperbolic juxtaposition of legal specialties may consider representing an entrepreneur to be “only about money,” or in some way a field where client emotions play less of a role than others, the stakes to the entrepreneurial client often also require an awareness of their mental health to adequately represent their interests. As Kerri Nottingham writes, “Certain legal entanglements are overtly stressful – being sued, being the victim of a crime, being responsible for high-stakes contract negotiations – but even seemingly ordinary tasks with very low levels of complexity can induce negative mental health outcomes for some clients.” Simply meeting with an attorney can cause stress for some clients, and if the client is already facing many stressors, it is important as an attorney to recognize this and the obstacles it may present.

The stress and high stakes for many entrepreneurs correlate with mental health outcomes. A Forbes article by Dan Murray-Serter, Why Entrepreneurs Need to Talk about their Mental Health, discusses a study by the National Institute of Mental Health which found that “72% of entrepreneurs are directly or indirectly affected by mental health issues compared to just 48% of non-entrepreneurs.” Despite all the confidences presented by an entrepreneurial client, they may be struggling. As an attorney, it is not only important but also potentially required by the Model Rules of Professional Conduct, to be aware of such considerations.

ABA Model Rule of Professional Conduct 1.4 lays out some very basic rules for communications between an attorney and their client. Among these, 1.4(b) maintains that “A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.” This rule requires that attorneys explain legal matters so that a client can make informed decisions. Even without a formal mental health diagnosis or questions of capacity, the client’s mental health or emotional state may need to be considered while explaining legal options.

One specific example to consider is imposter syndrome. Ann Vertel has written in this area.

“Imposter syndrome is real. It tends to affect high-achievers more than any other psychographic — especially women — and includes creatives like inventors, founders and entrepreneurs. When it hits new business owners, the effects are both subtle and powerful, causing them to doubt their accomplishments and preventing them from taking necessary risks.”

While the role of the legal profession is not to provide mental health services to clients, recognizing potential obstacles for clients, such as imposter syndrome, can help when explaining legal options for their business. Especially in difficult times, such as now, when 43% of businesses have closed at some point largely due to COVID-19, an entrepreneur needs an attorney who can explain complicated legal options through the stress and pressure so that those business owners can make an informed decision. (The impact of COVID-19 on small business outcomes and expectations | PNAS). One article discusses that even when an attorney cannot alleviate a client’s stress, they can help not add to it by practicing clear communication, setting expectations, practicing responsiveness, and having a welcoming environment. (Seven Ways Lawyers Can Reduce Clients’ Stress – Attorney at Work).

No matter how much money a client has, it is always a good idea to know a mental health services provider in your area that you can tell a client about if their specific situation potentially necessitates such resources.

In conclusion, practicing with an awareness of the client as a whole is important in all fields of law, and can have potential consequences ethically and legally as an attorney. While being an entrepreneur can be difficult, it is also important to remember that work is often an exciting passion for that client and that an awareness of these issues does not mean walking on eggshells or coddling a client; rather, it means overcoming the communication obstacles presented by mental health and emotional challenges, enabling the client to pursue their goals with a full understanding of their options, and sorting through and simplifying the legal stresses of their passion.

Inspired by my peer reviewer, Aaron Holland’s key takeaway section…

Key takeaways for entrepreneurs: Being an entrepreneur can be exciting and fulfilling…it can also be very stressful and correlates with mental health challenges. Take care to reach out to a healthcare professional as needed and if you don’t understand something that your attorney explains, always ask for clarification. Not only is this important for you as a person, but also can have drastic impacts on the success of your business!

Key takeaways for attorneys: Don’t assume your entrepreneurial client is an emotionally void case – the stakes can be extremely high for the entrepreneurial client, and it is your ethical duty to explain things so that they understand their options. Make sure you are keeping your client informed and updated effectively, and be aware that no matter how sophisticated a client may be, mental health and stress can pose a barrier to communication with anyone.

Not a lawyer,

Anne

This post has been reproduced with the author’s permission. It was originally authored on March 28, 2021, and can be found here.

Anne Horissian, at the time of this post, is a third-year law student at Penn State Dickinson Law. She is from a big family in the very small town of Meadowview in Southwest Virginia. She will graduate with a JD and certificate in Health Law in May 2021.

Sources:

Bartik, Alexander W., et al. “The Impact of COVID-19 on Small Business Outcomes and Expectations.” PNAS, National Academy of Sciences, 28 July 2020, www.pnas.org/content/117/30/17656.

“Communication under Stress.” HPRC, www.hprc-online.org/social-fitness/teams-leadership/communication-under-stress.

Murray-Serter, Dan. “Why Entrepreneurs Need To Talk About Their Mental Health.” Forbes, Forbes Magazine, 9 Oct. 2020, www.forbes.com/sites/danmurrayserter/2020/10/04/why-entrepreneurs-need-to-talk-about-their-mental-health/.

Nottingham, Kerri. “Lawyers as Counselors: Preparing Law Students and Practitioners to Face Clients’ Mental Health Concerns.” Campbell Law Observer, 15 June 2019, campbelllawobserver.com/lawyers-as-counselors-preparing-law-students-and-practitioners-to-face-clients-mental-health-concerns/.

“Rule 1.4: Communications.” American Bar Association, www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_1_4_communications/.

“Seven Ways Lawyers Can Reduce Clients’ Stress.” Attorney at Work, 24 June 2019, www.attorneyatwork.com/seven-ways-lawyers-reduce-clients-stress/.

Vertel, Ann. “Don’t Let Imposter Syndrome Derail Your Business.” Entrepreneur, Entrepreneur, 11 Sept. 2019, www.entrepreneur.com/article/337342.

Manar Morales | Entrepreneur of the Month | October 2020

By: Elikem Tsikata

Ralph Waldo Emerson famously said, “To be yourself in a world that is constantly trying to make you something else is the greatest accomplishment.” In today’s world, we all feel external pressures to assimilate and to change who we are. We are taught that if you want to be accepted to A school, B and C is required. If you want to be in the X profession, you have to dress and act a certain way. For Manar Morales, a professional opportunity at the cost of compromising one’s individuality is an unacceptable proposition. The former litigator-turned-CEO not only personifies Emerson’s mantra but actively creates it for others.

Manar is the founder, President, and CEO of the Diversity & Flexibility Alliance. The membership-based think tank partners with organizations to promote diversity and inclusion within the workplace. The company consults and provides tangible plans for workplace flexibility and diversity initiatives, creating unique avenues that challenge traditional theories of various sectors.

Family matters

Manar and I quickly bonded over similar upbringings. We both had parents who immigrated to the United States and instilled in us a pride of our heritage. Both of our parents molded paths into their professional fields that were not considered the norm for people who looked like us at the time. For Manar, this instilled a natural belief that she could achieve what she wanted, but she knew that a conscious determination and effort was necessary.

Manar grew up in Long Island, New York. The daughter of Egyptian immigrants, she had an early interest in employment and labor law. Simultaneously, she gained early exposure to tangible business experience. After graduating from Cornell’s Industrial and Labor Relations School, Manar worked as an Assistant Buyer at Saks Fifth Avenue in New York City. This could be considered her first entrepreneurial work experience as she managed sales and purchase orders. She then went to Catholic University’s Columbus School of Law, where she refocused her studies on employment law. After graduating, Manar became an employment law litigator.

professional path maker

I asked Manar what influenced her transition from practice to starting the company, and she quickly responded.

“I had my first son.”

Smiling, she admitted than an experience with a less than stellar nanny made her reconsider staying on as a full-time employment litigator. She knew she wanted to continue the work she loved, but that it may have to be reduced to a part-time basis. Manar proceeded to switch firms in order to work a part-time schedule and became of-counsel, while simultaneously starting work as an adjunct law professor at Georgetown University, teaching employment law and entrepreneurship. As she adjusted to her new life, women in the legal field and some who had left it, reached out to her. They expressed their appreciation for her professional course and wished they had done something similar. This made Manar question why women in the legal field were not getting the opportunities she had experienced to this point.

“I don’t think I had a proven path. It was really about me creating a path. For all the people who said, ‘Oh there’s no way you can be a litigator and do part-time’, there was a part of me that said, ‘No, actually I think I can.’ I may not be able to in one given environment, but I know that I can find an environment where I can.”

This premise opened Manar’s eyes to the possibilities of where the legal profession could go. The crucial question she asked at that point was how can we take the profession to the next level, providing opportunities for people to have more choices?

core principal: flexibility

The Diversity & Flexibility Alliance is classified as a Benefit LLC. Their goal is to create a community of members who value diversity and inclusion by looking at ways to leverage workplace flexibility to increase top talent.

“For us, it’s important that when people consider flexibility, that they de-parent, de-gender, and de-stigmatize flexibility. Our goal is to emphasize that flexibility is something that’s available to everybody, and everybody needs it for a variety of reasons.”

The company’s primary membership consists of law firms and corporations. They also work with associations, non-profits, professional service organizations, and tech-companies. As membership grew, Manar saw great value in the exchange of best practices over various sectors. The company could provide organizations of varying functions the opportunity to learn from one another. For the legal industry, Manar emphasized the importance of this. Notoriously stuck in its ways, Manar discussed how our profession needed to avoid the “echo-chamber” of only listening to itself, and embrace the other industries’ proven methods of effective workplace flexibility.

operating a business in the wake of two pandemics

Manar and I discussed how the COVID-19 pandemic has affected her operation of the business. Operationally, Manar said they were lucky and well-prepared for COVID. The Diversity & Flexibility Alliance has always been a hybrid organization. They ran virtually in many aspects, with some team members being fully remote already. In terms of providing services for their members, Manar says one of the biggest challenges they faced prior to COVID was the status quo regarding working environments. COVID’s natural effect has been the changing of how the world views a working environment and what that future will look like. For Manar and her team, this uncharted future provides a new opportunity to consider how to further the ideals of diversity and workplace flexibility moving forward. Additionally, she notes that while her team has been accustomed to hybrid styles of work, many members have not. She appreciates how this has created avenues for more (virtual) face-to-face with members, a more conscious engagement through technology. She is hopeful this time can be leveraged to further improve her client’s approaches to the future workplace.

We also discussed the other pandemic plaguing our country: systemic racism. As an agent of change in her own capacity, Manar shared how the heightened focus on social and racial injustice has affected her approach. She began by reflecting on the widespread acts of companies who made public statements denouncing racism. While she believes these statements can be important, she knows the actions that follow are truly the key.

“You have to create change internally. Public statements without internal reflection and change… I don’t think are effective. So for us, it was really about asking our members ‘What are you doing internally? Where can you create change? What are systemic changes you will be making moving forward?’”

Manar was encouraged by the greater sense of urgency among members, but she was more than aware that these issues cannot be fixed without continued focus and effort.

“Everybody can have it all … all is defined by you”

Manar’s leadership as an agent of change extends beyond her role at the Diversity & Flexibility Alliance. She frequently speaks on the topics of diversity, inclusion, woman’s leadership, and individual success. When I asked her about the importance of educating others about these topics, she reemphasized her core mission of giving others options.

“There’s a lot of debate on whether or not women can have it all. I think that everybody can have it all because I am a big believer that ‘all’ is defined by you. My ‘all’ may look different than your ‘all’ or someone else’s, but it’s my strong belief that we need to create opportunities for people to be able to have what they define as their ‘all.’”

This quote really stuck with me. Manar’s ‘all’ includes her family, the work she loves and creating positive change for others. I think often we find the task of juggling our priorities to be daunting. Careers, family, social life, fulfillment; some would call the pursuit of all at once unrealistic. And yet, as I think about Manar’s words and mindset, it actually seems simple. Determine what you want. Make action steps to have it. Work hard.

what do diversity and inclusion mean to you?

“Not just creating opportunities, but creating opportunities where people feel valued for who they are. People want to go where they are valued, not just tolerated. We always have to ask ‘Are we creating opportunities where people can feel proud of who they are and show up as that?”

Manar lives and breathes every bit of Emerson’s words, fighting against societal norms that we must suppress aspects of our identity for professional success. Our differences enrich professional environments and make them better. Instead of changing herself, she’s made it her mission to change the environment.

advice for entrepreneurs

“Do what inspires you. I’m a big believer that mindset drives so much of our respect. People should do what they love. Once you make that commitment, you’ll figure out the path from there.”

Manar’s passion is undoubtedly at the core of her success. She encourages entrepreneurs and professionals not to negotiate against themselves. She notes that often we say we want something but immediately create a barrier for why we can’t have it. She implores us to reject this mentality, set our sights on what we want, then begin to act.

For more information on Manar and the Diversity & Flexibility Alliance, including details to their Annual Conference, you can click here.

Elikem Tsikata, at the time of this post, is a third-year law student at Penn State Dickinson Law. He is a Ghanaian-American from McLean, Virginia, and a graduate of Miami University (OH). Elikem is pursuing a certificate in Entrepreneurship Law with a Transactional concentration. Elikem serves as President of Dickinson Law’s Student Bar Association. He is also a Research Assistant to Professor Samantha Prince.

Photo Sources:

https://twitter.com/manarmorales

https://www.facebook.com/dfalliance/

http://mondayswithmooney.com/2018/04/creating-your-path/

https://dfalliance.com/solutions/

https://dfalliance.com/solutions/diversity-framework/

From Passion to Non-Profit: Building A Non-Profit Organization

By: Ashley Javitz

Here are the basics on how to build your own non-profit organization like three phenomenal women: Eunice, Malala, and Reshma.

EUNICE KENNEDY SHRIVER

After witnessing the mistreatment and the exclusion of people with intellectual disabilities, Eunice Kennedy Shriver envisioned a world where people with intellectual disabilities were given the same opportunities as everyone else. In her world, sports and physical activity would serve as a common ground where all people could be united. In 1962, Eunice organized a summer day camp for people with intellectual disabilities. Camp Shriver served as the foundation for the Special Olympic Games, first held in 1968.

MALALA YOUSAFZAI

When she was 11 years old, Malala Yousafzai began writing a blog about her life during the Taliban occupation of Swat under the pseudonym Gul Makai. Her blogging along with a New York Times documentary about her life lead her to rise in prominence. Her fame, however, was not positively received by all as it caused her to be targeted by the Taliban. On a bus ride home from school, Malala was shot by a Taliban gunman in retaliation for her activism. Malala survived this attack and became an activist for the right to education. She founded the non-profit organization, the Malala Fund. Through her organization, Malala fought for a world where every girl could learn and lead.

RESHMA SAUJANI

As a part of her run for the United States Congress in 2010, Reshma Saujani visited local schools. and saw the need to close the gender gap in technology. In 2012, Reshma founded Girls Who Code, a non-profit organization which aims to deepen the computer science skills of high school girls, to clear pathways for them into the computing workforce, and to “build a supportive sisterhood of peers and role models who help [them] persist and succeed.” In just a short period of time, Reshma made great strides in achieving gender parity in computer science.

TOGETHER

What do these three ladies have in common? They were passionate about a cause. They were resilient, battling the forces against them. They were confident they would succeed. Under their leadership, deeply ingrained societal norms were tackled and incredible, life changing organizations were launched. Above all, their drive pushed their missions forward and created a widespread impact on countless people.

WHAT IS A NON-PROFIT ORGANIZATION?

A non-profit organization is an organization formed to provide a public benefit or to further a particular social cause. A non-profit organization is a tax-exempt group under the Internal Revenue Code Section 501(c)(3) and is classified in one of three ways: a public charity, a private foundation, or a private operating foundation.

HOW DO YOU START A NON-PROFIT ORGANIZATION?

STEP 1: DO YOUR RESEARCH

First, decide if starting a non-profit is the right decision. To make this determination, ask, “Is there a demonstrated need for my organization’s service in the community I intend to serve?” An answer can be established from a thorough investigation of the “demand” and the current or potential “supply.”

STEP 2: DEVELOP A PLAN

Next, build a strong infrastructure to support your organization. To do so, develop a detailed business plan. Your business plan should include an executive summary, a description of your company, a description of your products and services, a market analysis, a sales and marketing strategy, an outline of your company’s organizational structure, and a financial plan.

After your business plan is complete, create a timeline that is practical and calculate startup costs.

STEP 3: INCORPORATE AND ESTABLISH GOVERNANCE

This is the paperwork step. To incorporate your non-profit organization, you must:

(1) Choose a name for your non-profit organization;

(2) Appoint a Board of Directors;

(3) Draft your initial governing documents and policies;

(4) Decide on a legal structure (i.e., Nonprofit Corporation, B-Corporation, Nonprofit LLC, L3C, Unincorporated Nonprofit Association, Trust);

(5) Prepare and file your non-profit organization’s Articles of Incorporation in the state of choice;

(6) Apply for an Employment Identification Number; and

(7) Apply for federal 501(c)(3) tax-exempt status.

STEP 4: FILE FOR 501(c)(3) TAX-EXEMPTION STATUS

Tax exemption is the right of a charitable organization to exclude money from their annual taxable income. The excluded amount may be equal to or less than the total amount of taxes due. Tax exemption may also come in the form of a reduced tax rate.

The Internal Revenue Service (IRS) grants tax exemption status. To receive 501(c)(3) tax exemption status, a qualifying entity must apply to the IRS using Form 1023 or Form 1023-EZ, an Application for Recognition of Tax Exemption.

Provided by the U.S. Small Business Administration, the following is a list of items you will need when filing for 501(c)(3) status:

Certified copy of the certificate of formation from your state
Copy of your bylaws
Detailed pro forma financial statements, including revenue and expense statement for the current year and the three preceding fiscal years
Proposed budgets for the next two fiscal years; including a list of anticipated financial support
Narrative description of past, present, and future planned activities with an emphasis on broad public benefit of organization’s activities
Names and addresses of director and officers
Annual accounting period
Statement as to whether the organization is claiming status as a private foundation or public charity
Employer Identification Number
Fee of $400 or $840

Once the IRS reviews your application, a Determination Letter officially recognizing or denying your exemption status will be returned to you.

STEP 5: REGISTER FOR CHARITABLE SOLICITATION AND FUNDRAISING

(If Applicable)

STEP 6: MAINTAIN COMPLIANCE

Unfortunately, the road does not end once the IRS grants tax exemption status. An entity that receives 501(c)(3) status must then, on an annual basis, file a report with the state government, file a Form 990 with the IRS, and re-register any required items.

Now that you know the basics of how to build a non-profit organization, you are ready to turn your passion into a profit and starting building your own!

*This post was authored on January 21, 2019 and has been reprinted with Ashley’s permission. The original post can be found here.

Ashley Javitz is a second-year law student at Pennsylvania State University, Dickinson Law. She is from Scranton, Pennsylvania. She holds a Bachelor of Science Degree in Biochemistry, Cell, and Molecular Biology with a minor in Psychology from the University of Scranton. Faith and service to the community are an integral part of her life.

Sources:

www.specialolympics.org

www.malala.org

www.girlswhocode.com

www.sba.gov/blogs/how-start-non-profit?leavingSBA=http://nonprofit.about.com/

www.thebalancesmb.com/non-profit-4161501

www.councilofnonprofits.org/what-is-a-nonprofit

www.501c3.org/what-is-a-501c3/

www.nfib.com/content/resources/start-a-business/7-essential-sections-of-a-business-plan-49946/

www.harborcompliance.com/information/how-to-start-a-non-profit-organization-in-pennsylvania

B-Corp…C-Corp…S-Corp…What Corp?

by Christopher Harris*

In the past 5 years, Pennsylvania has added another letter to the discussion on Corporations – the “B” Corporation. Simply put, this was Pennsylvania recognizing an ever-growing trend of entrepreneurs being socially or environmentally responsible.

What is a “Benefit” Corporation and Why do I need to know about it?

Traditionally speaking, corporations are businesses that try to maximize profits for their shareholders. Benefit corporations, on the other hand, are businesses that are organized for profit, with a corporate purpose of creating general public benefit, in addition to any other purposes they have as a business corporation. Simply put, “a benefit corporation offers entrepreneurs and investors the option to build, and invest in, businesses that operate in a socially and environmentally responsible manner.”

For entrepreneurs that want to create a business that not only makes money, but also puts a social issue at its core, the benefit corporation, or B-Corp, may the right entity choice for you.

But what ARE the differenceS between C/S/B-Corp?

There are a few key differences between the three entities and knowing those differences are important when making your decision to incorporate.

C-Corp just means that the corporation was incorporated “normally,” or with no variation from the original and most typical type of corporation. C-Corp is another term for a regular corporation. These are the corporations that can generally be owned by anyone (or other entities), is double taxed (this means that the corporation files a tax return at the end of the year and the shareholders have to report their income when they receive a dividend), and lastly, has a duty to their shareholders.

S-Corp just means that an entity was incorporated under Sub-Chapter S of the Tax-code. (One of those variations from a regular C-Corp) Ownership in an S-Corp is limited to individuals who are U.S. citizens or resident aliens. This means entities cannot own a share of the S-Corp! They are also limited to 100 shareholders, while normal C-Corps can have as many as they want. Lastly, one of the biggest and most notable differences, is the S-Corp’s tax structure. S-Corps have pass-through taxation status. This is just like an LLC or Partnership. The S-Corp will not be taxed as an entity because the shareholders will have to report their percentage of income or losses, regardless if the corporation passed a dividend to the shareholders, on their tax returns. This is a major variance from the regular C-Corp taxing structure. Remember, a C-Corp as an entity is taxed on its profits at the end of its fiscal year and then the Shareholders are taxed after the C-Corp makes a distribution.

B-Corps are another variation from the regular C-Corp; this designation is made at the time of incorporation with the Department of State. When forming the B-Corp, the corporation must designate it as such in the articles of incorporation and check the appropriate box when you fill out the form from the Commonwealth. (A link to the Department’s forms can be found here.) The biggest difference with the B-Corp is that each year, the B-Corp must prepare and distribute to its shareholders an Annual Benefit Report describing its efforts to create public benefit during the preceding year. The report must be filed with the Department of State, which makes it a matter of public record. The biggest benefit, as already stated, is that B-Corps are allowed, in fact required, to carry on primarily for its stakeholders. The difference between a stakeholder and shareholder is everything. A shareholder is a stakeholder but a stakeholder may not be a shareholder. In other words, included in the term “stakeholder” are employees and creditors in addition to shareholders. So this means that the Board of Directors for the B-Corp can make a decision which would benefit the employees of company instead of making a larger profit for the shareholders.

Since the pivotal case of Dodge v. Ford Motor Company in 1919, Courts have agreed that the primary purpose of a C-Corp is to carry on for it’s shareholders. In this case, the Dodge brothers were shareholders of the Ford Motor Company. Ford, being truly ahead of his time, decided he would distribute less in profits to his shareholders in order to redistribute more money into the business. Ford also lowered the price of his trucks from 900 dollars to around 380 dollars. This of course cut-into long term profits and dividends, but also allowed more people to be able to afford the luxury vehicle. Ultimately, the Court decided that Ford had to distribute a larger dividend to his shareholders because that is what C-Corps are all about. If only B-Corps would have been a thing in 1919!

Conclusion

B-Corps aren’t for everyone! But, they may be for you if you are a social entrepreneur looking to create profit in your idea while also bringing about social or environmental responsibility. One must be mindful of the differences between each of the many different types of business entities and the different taxing structures which follow. Because of this, always make sure you contact an attorney before making any decisions regarding your future business. Checking with an attorney today could save you a lot of money and headache tomorrow!

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*This post was checked for currency on September 29, 2018 and reproduced with permission by author Christopher Harris. Original post can be found here.

Christopher Harris is a 2018 graduate of Penn State’s Dickinson Law. He is originally from Maud, TX and graduated from Southern Arkansas University with his Bachelor’s degree in History. He is now an Associate at Stock and Leader, LLP in York, PA, where he counsels school administrators on legal and policy matters as well as advises officials on school law trends.

Sources:

Photo: https://www.huffingtonpost.com/marissa-rosen/whats-working-the-benefit_b_7514020.html

http://benefitcorp.net/businesses/find-a-benefit-corp field_bcorp_certified_value=&state=Pennsylvania&title=&op=Go&sort_by=title&sort_order=ASC

http://www.dos.pa.gov/BusinessCharities/Business/Resources/Pages/Pennsylvania-Benefit-Corporation.aspx

https://ssir.org/articles/entry/s_corps_c_corps_and_b_corps_oh_my_corporate_structure_matters

Click to access ThePublicBenefitCorporationGuidebook_FrederickHAlexander.pdf

Click to access Benefit%20Corporations%20Chart.pdf

http://benefitcorp.net/

Social Entrepreneurs and Funding

By: Doris Baxley*

In an increasingly global community, more entrepreneurs are considering how their work can impact other parts of the world and help other individuals outside of their borders. While many social entrepreneurs are taking on noble causes and assisting individuals across the world, they often encounter difficulties acquiring funding due to the nature of their work. However, there are several foundations and government agencies that offer funding and assistance to social entrepreneurs. If you are considering starting a business that falls within the definition of social entrepreneurship, you should consider taking advantage of these opportunities.

What is Social Entrepreneurship?

Social entrepreneurship is the creation of business enterprises and companies designed to develop or assist cultural and societal issues. Social entrepreneurs may be in ‘standard’ or ‘typical’ businesses or they may be in the non-profit arena. Many social entrepreneurs are young individuals who are addressing complex global issues. The advent of popular social network sites, such as Facebook and Instagram, has contributed to the rise of social entrepreneurs.

Forbes Magazine and Business Insider are two respected business magazines that now create lists of top social entrepreneurs to watch in the upcoming years. Stanford University publishes a journal, the Stanford Social Innovation Review, which addresses developments in the social entrepreneurship field. Established Fortune 500 companies, such as Google, are investing money into social entrepreneurship ventures. This indicates that social entrepreneurship is a quickly developing area of business.

Funding for Social Entrepreneurs

The first hurdle for most start-ups is raising capital. For start-ups that are trying to affect social or cultural change, this can be a significant barrier to entering the marketplace.

Some venture capitalists are less likely to fund social entrepreneurs ideas due to concerns about immediate profits and runways. Typical businesses are viewed as a ‘safer’ bet for people looking to invest, because social entrepreneurs are not market-based price-driven companies. Harvard researchers have found that hybrid businesses run by individuals, such as social entrepreneurs, sometimes confuse venture capitalists because they don’t fall into ‘standard’ categories of funding. Because of the risk-adverse character that most venture capitalists and investors generally have, it can be more difficult for social entrepreneurs to get standard funding.

However, several foundations and government agencies provide funding opportunities for individuals who are using their businesses to affect global change. Many social entrepreneurs can fall into categories for federal government grants. In the private sector, several foundations provide opportunities for social entrepreneurs to qualify for fellowships that provide mentoring and funding opportunities.

Different Funding Strategies

Social entrepreneurs should consider employing different funding strategies to maximize their ability to raise capital.

Many social enterprises view investors as ‘donors.’ This can be attractive to investors because they are able to publicize their investments as donations. In some situations investors may be able to write off these investments as donations on their income taxes. Some social enterprises allow investors to serve as equity holders, with levels of donations (ex: Gold Level Supporters).

Some social enterprises employ quasi-equity debt structures. This is particularly attractive to non-profit social enterprises because they are limited in their ability to obtain equity capital under the law. Social entrepreneurs should consult with attorneys before establishing quasi-equity debt structures.

Employing different funding strategies can be beneficial for social entrepreneurs because they allow for capital to be raised in a way that is attractive to both investors and entrepreneurs.

Government Funding Opportunities

Several government agencies provide grants to social entrepreneurs. These grants often come with conditions, but are beneficial because they are interest-free and backed by the US Treasury Department. If possible, entrepreneurs should take advantage of government grants.

For example, the Environmental Protection Agency (“EPA”) provides environmental justice grants to social entrepreneurs who are trying to affect positive environmental change. In 2017, the EPA awarded multiple environmental justice grants and guaranteed at least one grant to each state. These grants were guaranteed by the US Treasury Department and were interest-free.

Government grants come with several strings attached, however. Social entrepreneurs should make sure that they qualify for government grants and that they are able to comply with grant conditions prior to applying to agencies for funding.

Private Funding Opportunities

Several private non-profits and foundations provide funding to social enterprises and social entrepreneurs.

The Bill & Melinda Gates Foundation offers loan guarantees to social entrepreneurs to help them meet their goals and qualify for more ‘traditional’ sources of funding, such as bank loans. These loan guarantees are not direct funds. However, they allow entrepreneurs to leverage donations and loans.

Bill and Melinda Gates speak with, Neema Malachi Najwale, nurse in charge at the Mapinga Dispensary in Tanzania on June 24, 2011. The Mapinga Dispensary received funding from their Foundation. Source: Federic Courbet

Another example of a private organization supporting social entrepreneurs is Echoing Green. Echoing Green is a foundation and venture capitalist organization that provides fellowships to young social entrepreneurs. The Echoing Green Fellowship Program provides leadership and IT support to social entrepreneurs. It also gives them the opportunity to meet with other individuals with similar goals and ideas. Seventy percent of social entrepreneurs funded by Echoing Green are still in operation today.

Private funding can be attractive to social entrepreneurs, as it may allow entrepreneurs access to greater amounts of funding immediately.

Overall, entrepreneurs should consider employing different funding schemes and applying for private and government fellowships and grants. These different opportunities allow social entrepreneurs to raise the most capital possible to achieve their goals.

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*This post was checked for currency on August 14, 2018 and reproduced with permission by author Doris Z. Baxley. Original post can be found here.

Doris Baxley, at the time of this post, is a third year law student at Penn State’s Dickinson Law. A Clemson grad, she is from Columbia, South Carolina. Doris is interested in corporate law and helping entrepreneurs achieve their goals. A more complete bio can be found here.

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