The Canal Street Blog

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Social Purpose Corporations Available in Washington Starting Tomorrow

Beginning tomorrow, June 7, you can form social purpose corporations in Washington.

What is a social purpose corporation?
A social purpose corporation (SPC) is a corporation organized to promote a general social purpose that is intended to positively affect certain constituencies. These constituencies must include one or more of: (1) the corporation’s employees, suppliers, or customers; (2) the local, state, national, or world community; or (3) the environment. In addition, a social purpose corporation may set forth specific social purposes for which the corporation is organized.

How are  SPCs different from a non-profit?
A non profit corporation can be organized to promote social purposes, just like social purpose corporations. However, social purpose corporations can also operate for profit. Because social purpose corporations operate for profit, they will not be eligible for 501(c)(3) status.

How are SPCs different from for profit corporations?
Directors of for profit corporations have a duty to act in the best interest in the corporation. This duty has been interpreted as a responsibility to maximize the financial returns for shareholders. If corporate directors take actions that promote a general social purpose at the expense of financial returns for shareholders, they may risk liability for breach of their duties to the corporation. The SPC legislation makes it clear that directors of SPCs can take actions that promote a general social purpose–even if it negatively impacts financial returns for shareholders.

How do you form a social purpose corporation?
A social purpose corporation is formed by delivering articles of incorporation to the Washington Secretary of State that not only conform to existing requirements for all corporations, but also identify clearly the corporation’s intent to become a social purpose corporation.

To clearly communicate the corporation’s intent to be an SPC, the incorporator must:

  1. Include the words “social purpose corporation” or the abbreviation “SPC” in the corporation’s name;
  2. Provide a statement in the articles of incorporation that the corporation is organized as a social purpose corporation;
  3. Provide in the articles of incorporation the general social purpose for which the corporation is organized and any specific social purposes designated by the corporation; and
  4. The the articles of incorporation must state that the mission of the corporation may be contrary to maximizing profits and earnings, or maximizing shareholder value in mergers or other significant transactions.

Can an existing business become a social purpose corporation?
Yes. An existing business can become an SPC if a two-thirds majority of all shareholders approve the change in corporate form. If the shareholders approve, the corporation will need to amend its articles of incorporation to conform with the requirements of an SPC.


If you have any questions about social purpose corporations, please feel free to post a comment below, or to contact inVigor Law Group.