In an article in the Spring 2011 Stanford Social Innovation Review, the author (an attorney) explores the shortcomings for the social entrepreneur of traditional commercial and non-profit models. He is quick to point that hybrids are nothing new and examines relevant facets of many existing models: B corporation, benefit corporation and low-profit limited liability company (L3C). Of note is that the models are all accorded different levels of recognition by Federal and state authorities and one (B corporation) isn’t a legal status at all, but a brand. He introduces the ‘contract hybrid,’ a model that is in effect a single structure (with multiple components) that can operate as both a for-profit and a nonprofit.
…businesses and nonprofits are fundamentally single-purpose entities. Although the law allows them to stretch toward each other, a complete synthesis is not possible, and the further each model is stretched, the more legally uncertain the venture becomes…What makes the contract hybrid different is the degree to which the goals, objectives, and strategies of the nonprofit and the business are coordinated to serve mutual interests…they are tied together in a way that allows the whole structure to leverage the strengths of each organization.
