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THE FOOD SYSTEM 6 BLOG

Business Entity Formation & Impact: Recap and Takeaways

3/9/2021

 
Last week we wrapped the Startup Refresh web series with a conversation on choosing the best entity type for your mission. This final episode featured three experts from the FS6 ecosystem - Renske Lynde, Lindsey Lusher Shute, and Mark White - each of whom joined to share their top tips and lessons learned from firsthand experience building, investing in, and advising for startups across the spectrum. Explore the highlights below, and listen to the full recording at the end of the post for a deep dive.
"We’re all on a learning journey. A very important part of being a successful entrepreneur is taking every little opportunity you can get to learn." -Lindsey Lusher Shute

Types of Entities:

To kick us off, let's review the business entity options available for startups that came up in this conversation. For a more expansive glossary, take a look at the FS6 Glossary of Business & Investment Terms.

For-Profit Entities:
  • C-Corp: a legal structure for a corporation in which the shareholders are taxed separately from the entity.
  • Benefit Corporation: a traditional corporation with modified obligations committing it to higher standards of purpose, accountability and transparency
  • S-Corp: a small business corporation that is treated for federal tax purposes as a partnership. 
  • Limited Liability Company (LLC): a corporate structure in the United States whereby the owners are not personally liable for the company's debts or liabilities.
  • Cooperative: an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.

Non-Profit Entities:
  • Foundation or Charity 501(c)(3): a tax-exempt, charitable organization.
  • Membership Based Nonprofit 501(c)(6): membership-based organizations or clubs that promote the business interests of their members, such as trade associations and sports leagues.

*B-Lab Certification: It is worth noting that B-Corp is not a legal entity type, but rather, a certification by the B-Lab organization. Mark White compared this certification to the “Good Housekeeping Seal of Approval.”

So how do you choose an entity type? Our speakers pointed out some of the benefits and limitations of each entity type and Lindsey Lusher Shute emphasized the importance of considering your impact goals and exit plan when weighing the best option. This topic spanned the breadth of our discussion so we recommend watching the recording below for specific details about which entity type is best for specific goals and considerations for transitioning your business structure.

A note on transition: You can pivot or change your entity type if it is not working for you but note that transitioning to a new entity type can take time and money. When pivoting entities, it is important to keep in mind that you must transition everything associated with the entity, such as a bank account or an identification number.

"You are not stuck in one category. You can change the definition of your business as you go along based on the requirements of the community." -Mark White

Raising Capital for Various Entity Types:

Raising capital will look different depending on your entity type. One of the opportunities that Renske Lynde espoused in this conversation is that of Blended Capital. This strategy of startup fundraising focuses on identifying the right kind of capital for your company at various stages and can bring in a diverse group of stakeholders - from investors, to foundations, to government - to support a business.

Interested in learning more about blended capital? Read this 2-part series by Renske on the benefits of blended capital fundraising for impact-driven businesses:


PART I: The Basics of Blended Capital
PART II: Blended Capital for Investors
"It is really important to find trusted advisors and people who are really aligned with what you are trying to achieve and the change that you are trying to make happen. If you have that fundamental alignment, the world is your oyster." - Renske Lynde

Panelists:
  • Mark White - Partner, White Summers
  • Lindsey Lusher Shute - CEO & Founder, Farm Generations Coop | Co-Founder, National Young Farmers Coalition |  Cohort 5 Entrepreneur, Food System 6
  • Renske Lynde - General Partner, 1st Course Capital | Co-Founder, Food System 6
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Mark White
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Lindsey Lusher Shute
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Renske Lynde


Missed the webinar? Watch the full recording here:
​


​View other recordings in the series here.

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    FS6 is a nonprofit based in the San Francisco Bay Area whose mission is to support impact-driven entrepreneurs as they transform how we grow, produce, and distribute food. The organization runs a comprehensive accelerator program that mentors entrepreneurs by coaching them through a wide range of business and organizational needs. FS6 also works to educate stakeholders on the unique capital needs as it relates to redefining the food system.

    Learn more about our program offerings and how to apply here.


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  • About
    • Funders & Partners
    • Impact Report 2021
  • Programs
    • FS6 Accelerator >
      • Circular Economy Program
    • Funder Engagement
    • Building Community
  • Portfolio
  • News & Events
    • Financial Coaching 2022
  • Resources
    • Newsletter Sign Up
    • FS6 Articles & Research
  • Apply
    • Participant Expectations
  • Donate