We’re proud to say that OpenFarm is officially incorporated as a California Non-Profit Public Benefit Corporation! Read on to see why we chose this legal entity.
First off, why have a legal entity at all? The answer is for several reasons:
- To separate and protect OpenFarm’s finances from our staff’s personal finances
- Because we offer a service and because we collect and store user information, we have liability. This means we need legal protection and insurance, of which a legal entity gives a framework for protecting our staff, our users, and the organization
- To hire and pay our staff members and pay any taxes due on revenues or other activities
- To enable us to partner with other organizations and individuals in a more formal way
- To allow the organization to be perpetuated if/when the founding team members move on
- To protect the organization from internal conflicts and interests especially related to ownership, intellectual property, and revenues
- To formalize the organization’s purpose in a legally binding way
- To ensure that any assets and capital the organization owns is in good trust to be used for the intended purpose of the organization
Of the legal entity options available, we considered the ones below and had the following thoughts about each. We ultimately chose the non-profit public benefit corporation based on our analysis of the options and our goals and intentions for the organization.
- Co-op – The co-op model is fantastic for many organizations with social, environmental, and public benefit intentions. It seems to work best for well defined, small to medium sized groups of people: either people of a specific geographic region, or of a specific industry and who have very specific goals in mind. The co-op model doesn’t seem like it would scale easily to a global membership, or be suitable for a new organization like OpenFarm that is still setting its roots and figuring out what exactly it will be growing into. However, we do think that OpenFarm will function a lot like a co-op because of our values of transparency, inclusivitiy, and our purpose being to serve our users rather than to make profits.
- Traditional for-profit C-Corp or S-Corp – This just doesn’t fit with our ethos. OpenFarm is not here to make profit for founders or shareholders. We’re here to fill a need, to build community, to promote an open future, and to provide value in an efficient manner – not extract it. Though we think that business is a strong force for social change, we believe that money as a motivator is not a prerequisite for doing business. We view money as a means to an end. Not an end in itself.
- B-Corp or Benefit Corp – This type of entity is essentially a traditional for-profit entity with the added ability to legally have social and environmental goals in addition to profit goals. Many forward thinking socially minded for-profit companies are switching to this entity, though it isn’t quite right for OpenFarm because we don’t see the need for money to be one of our goals at all, or for there to be shareholders of OpenFarm.
- Traditional non-profit public benefit corporation – The traditional non-profit model allows us to place our values and goals first and foremost. It removes money and profit from being an end goal, and ensures our Vision is the true end goal. Being a non-profit allows us to pursue many grant funding opportunities that can allow us to scale and grow in ways that would not normally be financially sustainable or feasible. Furthermore, many other organizations and individuals desire to work with, volunteer for, and donate to non-profits for tax benefit purposes and the added security that the organization is Mission/Vision driven and will use its resources for those purposes, not for profit. Last, as a non-profit, we have the opportunity to become 501(c)3 tax exempt, which means we don’t have to pay many taxes because we are doing a social and public good.