Monday, February 20, 2012

SEB Legislation is Coming to Connecticut

Social Enterprise may be coming to Connecticut!  A bill is now being considered by the Commerce Committee that would create a new Social Enterprise Business (SEB) designation.

This is good news to all!  I've been asked a few very good questions that I wanted to share:

What makes SEBs different from another type of business?
With this SEB designation a company
  • needs to be mission based, and this mission must be for social benefit, and be spelled out in the by-laws
  • needs to plow at least 20% of any distributed profits back to the mission
  • needs to disclose the compensation of the highest earners
  • can not return to a traditional for-profit status, and if it is to be sold then the assets will go to another SEB or a nonprofit with a similar mission.

Why not just set up as a nonprofit?

Entrepreneurs who start a social enterprise business own that business, can earn a return on their investment and sell the company for a profit. There is no real "owner" of a nonprofit organization in that traditional sense, and the founder can not turn around and sell it for a profit.

Then why not just set up as a regular for profit?
Think about Ben and Jerry's Icecream. They had a social enterprise philosophy and ran their company accordingly, but without this designation, when they sold the company to Unilever, the guts of the philosophy got sucked out of the company and all that is left is the husk of their intention which is used as a marketing tool. If they had been able to set up as an SEB it would continue to run as they intended today. A social enterprise designation allows an entrepreneur with a conscious to combine purpose with profit.

With this legislation we have an opportunity to create a business designation for those people who want to use business to solve community problems.  Business is a huge and powerful force, and with this legislation we can help make it a force for good in Connecticut!

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