In Ohio, figuring out the correct “business model” for CivicHacks has been quite challenging.
As an entrepreneur, I first did the easiest thing in the world, with my attorney, I filed to become an Ohio-based LLC, a sole proprietorship even. Bank account, Federal EIN, etc. Simple.
But I’m not just an entrepreneur, I’m a “social entrepreneur” fueled by a passion for public service who realizes that a private profitable business entity is the best way to do authentic work on that mission. The idea of “measurable outcomes” rings true for me. So does guiding the ship with other C-Levels.
Therefore I set out to establish a “Benefit Corporation.” This shouldn’t be confused with “Certified B Corp” which is a distinction awarded by a non-profit similar to foods certified to be organic.
A Benefit Corporation requires state legislation allowing a business owner to write in their bylaws that the intention of the business, and therefore the profits, is to affect the mission. This protects the entrepreneur if they were to ever go public where your only mission, by law, is to make money. There’s more to it but that’s the basic gist.
Ohio doesn’t have Benefit Corporation legislation.
So what do I do as a social entrepreneur committed to establishing and building in Test City, U.S.A.? (“Oh just go to Delaware!” is what I hear. No thanks, I don’t even know anyone that lives in Delaware.)
The only option is to be a non-profit. The idea of becoming a non-profit (literally # 9,001 just in Columbus) never appealed to me until I met with an exec at Battelle who shared their model as a “self-sustaining non-profit.” Essentially they invent and create and then license out the patent to those who take it to market. Xerox is a leading example.
Armed with this knowledge, I started down the very expensive and cumbersome path of becoming a 501(c)3. But very quickly I have realized that doing that would essentially tie our hands to do anything outside of our narrowly defined tax-exempt status.
Truth is, we are not planting trees, we’re still figuring it out, this is an entirely new industry using the creative knowledge mindset to help solve civic challenges. Further, my personal leadership style doesn’t fit the model of reporting to a board of directors for decisions, and I’m not crazy about writing 70-page grant proposals to folks that may or may not understand what we’re doing. I’d rather do.
So non-profit, at least now, will not work. So we’re moving on, keeping our legal status as an Ohio-based LLC, and will continue to do our work, pay our taxes, and keep it nimble. We can always open this can of worms again if we need to.
Two other models I’m working to learn more about are Low-Profit Limited Liability Company and the Community-Interest Company (UK). Neither of these are options in Ohio, of course.
I’m not an expert on how a business should be structured, all of these models could be flawed, but I know my intention as a social entrepreneur is true.
Ohio will build companies that have the speed, size and efficiency of Apple and Google that authentically have a mission of doing good for our community, but first we need legislative permission to do so. And, on a side note, it’s companies like that which will help us retain our best and brightest who leave for the coasts seeking purpose, adventure, and interesting challenges.
Update: Benefit Corporation legislation passed in Ohio in 2021. 🫡