Which gives a comparative advantage - 2 companies- private limited and section 25 not for profit or one public limited company?
What is a better option? To form two companies - one private limited for income generation and one section 25 for social good. Or just form one public limited company where we can do both?
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Mar 6, 2014
There is a unique model in the United States for a charitable LLC which is only adopted by a few states thus far. This is a company that is formed for profit, but has nonprofit goals and visions which make it a unique and fairly new concept.
I studied this a bit and while there are tax implications to consider, its a great option to pursue for starting off small and then giving flexibility in going in either direction.
I assume you are in India as per the section 25 part? In India, it is better to start a private limited company first, as section 25 and public limited have a lot more regulation and burden to start off with. You can always convert later on down the road, but private ltd's have much more flexibility and adaptability than the others.
Mar 4, 2014
Hi Subidita,
This is a very good set of questions. There is another option available in many states as of 2010; it's called a B Corp. Roughly speaking, a B Corp, or Benefit Corporation, allows stockholders to assess the operations of the company based on the benefit the company proposes in its mission statement. This holds the company executives to a different standard - one that is not based solely on share price maximization.
You can read more information about a B Corp in Wikipedia (http://en.wikipedia.org/wiki/B_Corp).
Good luck!
Brad
Mar 4, 2014
Hi,
The Brazil laws have several items that can make you confuse. I can tell you that in the start of the business (with or without own money) a private limited surely makes you save money.
Mar 3, 2014
Just form one public limited liability company! This is a better option as both can be done in this option under social responsibility.
Mar 3, 2014
Every case is different depending upon the product and it's success. Some start a charitable institutions appealing masses and cash comes from all over. Some start; but difficult to get funds. All depending upon the type of charity. Some start with great innovation and it is a hit in no time and then they start charity organization too. Many start private limited and never go for IPO to control and pass over to the family and have been extremely successful. All due to the consistency in products. Some start and run for some times to be profitable and go for IPO. It is all individual choices and the success of the products and market share. Some are happy with being a small player and some big players. Every one has a different vision and motive. No universal law. Pradeep Berry of Financial and Auditing Consulting services, Inc
Mar 3, 2014
Its always better to start with Private Limited company where in you can start your initial steps, as there are not much legal things involved. Once you know how things are working then you can think of opening new doors..
Mar 3, 2014
As a start up being a non -profit could be a great way to get market share and then opening a for profit for growth and national dominance
Mar 3, 2014
Hi Ms. Chatterjee,
Glad that posed this question. In order to address this, it might be better to do some self homework before proceeding to the legal expert.
What exactly is an "Advantage" to you? If you can clarify it,I might be able to give some directions for your comparison needs. Good luck.
Dr. Shree
Mar 3, 2014
I just realized that I should assume different scenarios instead of posing more questions to the one posted here.
So here are some scenarios:
a - Profitable, Growth, Great PR - Public Limited Company or Privately Held
b - Non Profit, Purely Social Cause, and Great PR - Non Profit for Social Good
c - Purely Profitable, Growth, No PR - Not likely to survive this millennium
The great flexibility about scenario "a" is that one can be brutally profitable and yet compassionate to the customer, community, and to Causes in this world. In today's world, one can generate income with the crowd and realize their vision.
When these enterprises are run right by the right people, the chances of a sustainable and profitable growth with value toward a social cause is simply exponentially higher in scenario "a."
Good luck.
Dr. Shree
Mar 3, 2014
In my opinion, its all a matter of defining your Human Resources as a project manager. if you know how much time you will dedicate to your non profit.
Actually im facing the same challenge in my case the non profit is formed for research and im in a process of forming non profit organisation as well.
Mar 3, 2014
we have a service to add people looking to open a non profit and save time and money.
Mar 3, 2014
a Juristic entity cannot be an advantage it is a platform or vehichle not a race horse - focus on the business and income and that defines the vehichle
Mar 3, 2014
Obviously, one tries to make money first to start a charity. In order to do so, the simpler path and the best option is to start a company take it to the public ltd level and initiate a division within. However, both the options are challenging...managing two separate organizations is quite an effort too.
Mar 3, 2014
You should seek counsel from an expert non profit lawyer. A big deal clearly.
Thanks Brad and many others from so many countries who has added to the knowledge base.
I do hope other countries would also incorporate this idea of a benefit corporation soon.Unfortunately, as far as I know India, where I live, does not have anything of the kind so far.