Incorporating Purpose

Business and Organizational Structures for Doing Good

If you have an idea to do some good in the world beyond what your own physical labor can achieve, you need a vehicle to scale it. There are several ways to get a group of people together to work towards a common goal. These assemblies of people are referred to as organizations or businesses. The Merriam-Webster dictionary defines business as :a bowel movement—used especially of pets

Wait, sorry. That's definition # 9. Definition # 1 is:

Business:

: a usually commercial or mercantile activity engaged in as a means of livelihood

To put that in crystal-clear English, a business is an organization that buys and sells things in order to earn money. When people work together in a business to produce something they sell to other people who want it, they make money. With that money, people buy things from other businesses to improve their lives, like food, electricity, houses, and computers. This system of groups of people producing and consuming different goods and services is called an economy.

There's this idea gaining in popularity that businesses, especially "corporations," are bad. Many people, especially academics, view businesses as greedy, profit-seeking monsters that destroy the environment and exploit workers for personal gain.

While that may be true in some instances, that's not the whole story. Businesses are groups of people largely responsible for creating the goods and services that we want and use daily. The entrepreneur takes a risk when she starts a business. Statistically, she's likely to fail. But she takes the risk because, if successful, she can earn a good living or become wealthy if enough people want to buy what her company sells.

Making a profit—taking in more money in sales than it spends on expenses—is a requisite condition for a business to continue to exist. In many cases, maximizing profit is the end goal. In the process of pursuing profit in the system of capitalism, some good things happen. A wide variety of goods and services become available for consumers to voluntarily purchase to improve their lives. However, some negative effects occur too. Some costs are externalized on the environment, and working conditions can be poor.

The central problem of business and the economy at large is this:

As a consequence of creating an abundance of goods and services for people to buy, natural resources are overextracted, natural habitat is destroyed, ecosystems are disrupted, exploitative human labor practices arise, and pollution is rampant.

Entrepreneurs tend to be hard-working risk takers with the ambition to make stuff happen. Verbally assaulting them as enemies of mankind is not productive in the battle against environmental degradation. It's not the way to get someone to see your viewpoint—it's the way to create polarization and stifle progress on the goal. Rather than alienating businesses and their owners, what if we provided ways for them to avoid harmful externalities and still produce goods and services profitably?

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If you have a vision to start a business or organization to do good in the world, you must decide what legal type of entity it will be. This sets the foundation for how it earns money, how it's taxed, how it governs itself, and what it exists to do.

Some entities focus on ESG issues and reducing environmental harm. With any organization, money is a requirement. Without it, the organization cannot remain viable. For-profit businesses must make a profit, and non-profit organizations must survive by donations. Good or bad, without money, an organization won't last and cannot continue to do its work.

Profit for a business is like oxygen for your body. You need to breathe to live, but the point of living isn't to breathe.

What follows is a rough guide to organizational entities. It is not advice or a legal guide. It’s a practical map for those who want to build something that lasts and makes the world better.

Classic Business Entities

Sole Proprietorship

The simplest form. One person owns and operates the business. There’s no legal separation between owner and entity. Profits flow straight to the owner and so do the liabilities. It's cheap and easy to start. You don’t even need to file anything to create one—it exists the moment you start doing business under your own name. But it offers no liability protection. If something goes wrong, your house, car, and savings are on the line.

Partnership

When two or more people go into business together without forming a separate entity, they have a general partnership. Like a sole proprietorship, it’s easy to start and has no legal protection. Each partner is personally liable for the debts of the business—even those incurred by the other partner. There are limited partnerships (LPs) and limited liability partnerships (LLPs) that offer more protection, but they require formal agreements and filings.

Limited Liability Company (LLC)

This is the default choice for small businesses that want flexibility and protection. An LLC separates the business’s assets and liabilities from the personal assets of its owners (called members). It can be taxed as a sole proprietorship, partnership, or corporation. The rules vary by state, but LLCs require basic annual filings to stay in good standing. They’re flexible, simple, and offer legal protection. But they're not ideal if you're seeking venture capital or going public.

Corporation (C-Corp and S-Corp)

A corporation is a legal entity entirely separate from its owners (shareholders). It can raise capital through stock, attract institutional investors, and scale globally. C-Corps are taxed at the corporate level, and shareholders are taxed again on dividends. S-Corps avoid double taxation but come with ownership and stock restrictions. Corporations are required to have boards of directors, regular meetings, and strict record-keeping. They are built for scale.

Entities for More Than Profit

If you want to build an organization that does more than simply making a profit through the sale of your products or services, like serving the public or protecting the planet, the following entities may be for you. They may earn profits, but profit isn’t their north star.

Nonprofit Organizations, 501(c)(3)

This is the most well-known structure. Nonprofits are tax-exempt organizations that exist for a charitable, educational, religious, literary, or scientific purpose. Donations are tax-deductible. The key feature is that no one owns a nonprofit. It’s governed by a board, and any surplus money must be reinvested in the mission, not distributed as profit. They must apply for 501(c)(3) status with the IRS and submit annual filings (Form 990) to maintain their status. The scrutiny is real. If they deviate from their mission or misuse funds, they risk losing their exemption.

Nonprofits are essential in fields where there is no marketable product or service or where profit can’t justify the work, like homeless shelters or preserving ancient forests. The Nature Conservancy, for example. But they have limits. They often struggle with funding. They can’t take investment capital in exchange for equity. Their growth depends on grants and donations, and they are bound by tight governance requirements.

Benefit Corporations / Public Benefit Corporations (PBCs)

This is a new breed of corporation. Like a regular C-Corp, a PBC can make money, raise capital, and grow. But it must also pursue a public benefit and consider the impact of its decisions on workers, community, and environment. It is legally required to balance profit and purpose. Each state defines this structure slightly differently, but most require that the company adopt a specific public benefit in its charter and produce an annual or biennial benefit report assessing its progress.

The benefit corporation doesn’t get tax exemptions like a nonprofit, but it gets the freedom to put mission before maximum profit without risking lawsuits from shareholders. A traditional corporation must prioritize shareholder value. A benefit corporation must also consider other stakeholders. PBCs are a great way to balance a traditional for-profit business with a mission-driven purpose beyond the balance sheet. For example, Patagonia and Hempitecture are PBCs.

A Public Benefit LLC (PBLLC) blends the flexibility and simplicity of a traditional LLC with the legal mission alignment of a public benefit corporation (PBC). This form allows mission-driven entrepreneurs to enjoy LLC pass-through taxation and minimal corporate formalities while legally protecting their commitment to purpose. These are relatively new, and as of this writing, only six states recognize PBLLCs.

Certified B Corporations

B Corps are a certification, not a legal structure. Certified B Corps are for-profit companies that meet rigorous standards of social and environmental performance, accountability, and transparency. The certification is issued by a non-profit called B Lab. To become certified, companies must score at least 80 out of 200 on the B Impact Assessment, which reviews governance, workers, community, environment, and customers.

B Corps must recertify every three years and pay an annual fee based on revenue. Certification requires changing your legal framework (in the U.S., usually becoming a benefit corporation or adopting similar language in your bylaws) to lock in stakeholder governance. B Lab also performs random audits and may decertify companies that fail to uphold standards.

What makes B Corps powerful is credibility. The label tells consumers, employees, and investors that a company walks the talk. Brands like Patagonia, Ben & Jerry’s, and Allbirds are B Corps. The community is growing fast because it’s a middle path between traditional capitalism and pure philanthropy.

Social Purpose Corporations (SPCs)

Available in a few states, like Washington and California, SPCs are similar to benefit corporations but with slightly different language and requirements. They are not required to pursue a “general public benefit” (as PBCs are) but may focus on a narrower purpose. Their main advantage is clarity. They let founders enshrine a social mission into the DNA of their company, without as much formal reporting as PBCs. SPCs must still balance profit and purpose, but the legal language varies by state. The goal remains the same: to allow companies to grow and profit while doing good. Good Eggs is an SPC.

Cooperatives (Co-ops)

Co-ops are businesses owned and operated by their members, who can be workers, consumers, or producers. The mission is shared benefit, not shareholder value. Profits are usually redistributed among members based on use or labor, not capital invested.

There are worker co-ops (owned by employees), consumer co-ops (like food co-ops), and producer co-ops (like farming collectives). Each type is structured to distribute decision-making power and wealth more equitably. Co-ops are often more democratic, resilient, and community-rooted than traditional firms, but they can be harder to scale and finance.

They usually incorporate under specific state co-op laws and must follow governance rules like electing boards and holding member meetings. Some co-ops are tax-exempt if they meet certain criteria, while others are taxed like regular businesses. Companies like REI (outdoor gear) and Ocean Spray (the cranberry people) are co-ops.

Low-Profit Limited Liability Companies (L3Cs)

The L3C is a hybrid between a nonprofit and an LLC, designed to attract program-related investments (PRIs) from foundations. It’s a for-profit entity with a primary charitable mission and secondary profit motive. Only a few states offer it, and it has struggled to gain traction because the IRS has not formally recognized it as a guaranteed recipient of PRIs.

Decentralized Autonomous Organization (DAO)

A DAO is a newfangled blockchain-native organization that operates without centralized leadership, governed instead by smart contracts and token-holder voting. Decisions are made collectively by participants using cryptocurrencies or governance tokens, and rules are encoded into the blockchain. DAOs enable global, trustless collaboration and transparent operations, often used in Web3, DeFi, and open-source projects. Legal recognition is still emerging, and regulatory frameworks are still in flux. DAOs aim to redefine governance with radical transparency and democratic ownership. These currently suffer from security, coordination, and accountability issues, and are probably not the best option for a scalable organization. Good luck getting all token holders to vote on every issue in a timely manner.

How to Choose

Choosing an entity is about asking what you’re trying to build. Do you want full control or shared governance? Do you want to scale with outside investment or preserve values with community ownership? Do you need grants and donations, or customers and revenue? Are you maximizing shareholder returns or balancing profit with purpose?

Why It Matters

Let's do a quick thought experiment. Imagine you are a multi-trillionaire. You can buy anything you could possibly want. After you get all that crap out of your system, then what would you do? How would you spend your time? What would you work towards? What would be your purpose?

Structure shapes behavior. A company structured as a C-Corp or an S-Corp is legally obligated to maximize profits for shareholders. While there are almost always economic and societal benefits resulting from companies seeking profit, consumers these days are looking to purchase from companies that have the freedom to pursue a purpose beyond profits.

One thing traditional companies fail to do is account for externalities, resulting in the tragedy of the commons problem, where the pursuit of personal gain causes harm to everyone and the environment. Purpose-driven businesses and organizational entities build a mission and purpose into the DNA of the organization. While not perfect, and certainly open to exploitation, they provide a vehicle to do good in a broader way.

We need these business structures. Today's polycrisis demands a pathway for the entrepreneurs, go-getters, and folks with the ability to GSD to assemble teams of people to make solutions happen. Human enterprises should not only provide products and services that others want and are willing and able to pay for, but should also address the problems that past enterprises have caused (by intention or not). Demonizing others and complaining won't accomplish anything.

The linear extractive model of industrial production on all scales has indeed produced unimaginably advanced and prosperous lives for billions of people, but at the expense of the health of the natural systems that support life.

Are you going to be a whiner or bystander? Or are you going to be a builder of a more beautiful world in service of life?

If you are a creator, who or what will you dedicate your life in service to? Which organizational entity will best facilitate getting it done?