One current trend around the world is the creation of alternative business models. Most Texans are probably familiar with the general distinctions between a sole proprietorship, a partnership, a for-profit corporation, and a nonprofit corporation. But what alternative models are available for businesses in Houston and the rest of Texas? To what degree are those alternative models practical or popular around the city and the state? And what can we do to improve the legal framework and the business climate for those alternative models?
The website of the Texas Secretary of State contains this information:
May a for-profit corporation include a social purpose in its certificate of formation?
Traditionally, corporations have been characterized as either for-profit or nonprofit corporations. Generally, a corporation organized for charitable, benevolent, religious, cultural or other similar purposes must be formed as a nonprofit corporation. [See § 2.008 of the Texas Business Organizations Code.] However, § 3.007 of the Code was amended by SB 849, effective September 1, 2013, to authorize a for-profit corporation to include one or more social purposes in its certificate of formation. The specific social purpose or purposes would be in addition to the purpose or purposes required to be stated in the for-profit corporation’s certificate of formation.
Social purposes are defined in § 1.002(82-a) of the Code and consist of promoting one or more positive impacts or minimizing negative impacts on society or the environment. For example, social purposes may include providing low-income or underserved individuals or communities with beneficial products or services; promoting economic opportunity for individuals or communities; preserving the environment; improving human health; promoting the arts, sciences, or advancement of knowledge; increasing the flow of capital to entities with a social purposes; and conferring any particular benefit on society or the environment.
The certificate of formation may also include a provision that the board of directors and officers of the for-profit corporation may consider any social purpose specified in the certificate of formation in discharging the duties of directors or officers. To determine the extent and circumstances under which an officer or director of a for-profit corporation must consider social purposes, please review chapter 21 of the Code, specifically §§ 21.101 and 21.401, as amended by SB 849. If you have questions about social purposes, you should consult with your attorney. The secretary of state’s office cannot provide you with legal or business advice.
"Formation of Texas Entities FAQs," Texas Secretary of State, accessed September 18, 2014, http://www.sos.state.tx.us/corp/formationfaqs.shtml.
