DISCLAIMER: THIS INFORMATION IS FOR GENERAL PURPOSES, AND IS NOT INTENDED TO CONSTITUTE LEGAL ADVICE TO ANY PARTICULAR INDIVIDUAL, BUSINESS, OR SITUATION. THERE ARE SIGNIFICANT LEGAL AND TAX CONSEQUENCES TO INCORPORATING A BUSINESS AS EITHER A PUBLIC BENEFIT CORPORATION OR A COOPERATIVE, AND PARTIES SHOULD CONSULT THEIR OWN LEGAL AND TAX ADVISORS BEFORE INCORPORATING A BUSINESS ENTITY AND/OR USING ANY FORM LEGAL DOCUMENTS PROVIDED IN CONNECTION WITH THIS SUMMARY.

These model corporate formation documents have been provided in consultation with Blue Dot Advocates. https://bluedotlaw.com

If you use these model documents in the formation of your news/journalism business we’d appreciate you let us know and get credited, ideally with a link to our website. We prefer “Fourth Estate” or "Fourth Estate Public Benefit Corporation".

 


 

Introduction

The Fourth Estate is providing form legal documents used in connection with incorporating a new journalism business as either a Delaware public benefit cooperative (“PBC”) or a Colorado public benefit cooperative (“PBCoop”).

While start-up founders could choose between many legal entity forms, The Fourth Estate believes that the Public Benefit Corporation and Public Benefit Cooperative structures are attractive choices in many circumstances for start-up journalism organizations, though alternative structures may be preferred in certain situations.

Model form documents are provided for PBCs organized in Delaware due to that state’s well-settled body of corporate law that is also favored by third-party investors, while PBCoop forms are provided for Colorado, as the sole jurisdiction that currently permits the public benefit cooperative form.

 

Similarities

Both the PBC and PBCoop structures provide for:

  • A legal entity to shield the business owners from liabilities of the business (provided corporate formalities are observed)

  • A potential for raising third-party capital for business needs

  • A “public benefit” structure, which:

    • can limit directors’ liability for certain actions taken in pursuit of the identified public benefits but that fail to maximize shareholder economic returns,

    • require that the organization pursue identified public benefits, and report to stakeholders on progress against those goals, and

    • make the organization eligible for ‘B-Corp’ status under current requirements (imposed by B Labs).

Differences

  • State of Organization. The documents provided are for a PBC organized in Delaware and a PBCoop organized in Colorado. Choosing either structure would require governance under each respective state’s laws. (Businesses that operate outside of the state of organization would need to file as a “foreign entity” doing business in their state of operation.)

  • Level of Governance Complexity. Delaware PBCs are largely governed by Delaware’s corporation law, which is considered to be relatively simple and straightforward. While Colorado’s cooperative law is generally considered to be a good model for cooperative law, cooperatives are more complicated organizations that require specialized advising. Coordination with an experienced coop lawyer is highly recommended.

  • Ownership Rights. PBCs have the ownership structure of a typical corporation: stockholders vote and exercise economic ownership over the PBC relative to their percentage ownership of stock. By contrast, each owner of a PBCoop has 1 vote (democratic voting), and will share in the economic ownership of the PBCoop relative to their amount of cooperative patronage, which is essentially the relative amount of business they do with the PBCoop.

  • Third-Party Investment. Delaware PBCs provide an “investor friendly” structure that accommodates many types of outside investment, and in particular, equity investment suited to high-growth oriented businesses. PBCoops are more limited in terms of outside investment, though cooperatives can issue notes to debt investors as well as debt-like, non-voting preferred equity.

  • Tax Treatment. PBCs are taxed as ‘C-corporations,’ which incur a corporate-level tax on net earnings. PBC owners are then taxed upon receipt of any dividends (which are not deductible by the PBC.) PBCoops are generally taxed as cooperatives, which is similar to ‘C-corporation’ tax treatment but with the ability to reduce taxable income by the amount of patronage dividends paid. PBCoop owners are taxed upon receipt of patronage dividends. PBCoops should engage an experienced coop accountant to help in computing patronage and filing cooperative tax returns.

 


Journalism/News Public Benefit Corporation [Delaware]


Journalism/News Public Benefit Cooperative [Colorado]


 

These attorney prepared documents are products of the Fourth Estate Public Benefit Corporation (Fourth Estate), a multi-stakeholder public benefit cooperative established to foster, support and incubate a sustainable and vibrant free press.

Through the use of cooperatives and public benefit corporations, news entrepreneurs can better manage risk, strengthen bargaining power, and improve the lives of the people in the communities that they serve in ways that would be impossible as individuals.