Considerations on Legal Structures for Impact Enterprises

The Objectives

There is no single legal structure for all impact enterprises. It depends on what the founders want to achieve with the structure. Typical objectives that I have heard are:

The Options

After considering the objectives of the entrepreneurs, the next step is to evaluate the available options within the legal system where the enterprise is operating. In general, there are three types of legal structure configurations to choose from:

Point of View of Investors

In general, legal structure does not matter much to lenders, as their main considerations are the debt-servicing ability of the company and their collateral.

Closing Remarks

Having the right legal structure from the beginning is important, but not as important as entrepreneurs often think. I have seen a bright young entrepreneur who, out of idealism, set up his Company as a cooperative² and could not scale up due to lack of external capital. It is perfectly fine to have strong principles, but keep the structure simple in the beginning. Don’t lock in too early, with the options to change it later as business and organizational values evolve.

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Adi Sudewa

Adi Sudewa

Venture Builder. In Medium to share perspectives on how industries are being transformed by digital technologies.