Why Kickstarter Became a Public Benefit Corporation (Video)

Meet Kickstarter co-founder and CEO Yancey Strickler. Timothy Lord asked Yancey about Kickstarter's recent move to become a Public Benefit Corporation, which is, according to Wikipedia, "a specific type of corporation that allows for public benefit to be a charter purpose in addition to the traditional corporate goal of maximizing profit for shareholders."

This corporate restructuring has no tax advantages, and creates a slight increase in paperwork, Yancey says. So why did they do it? Please view the video (or read the transcript, which has more info than the video) to find out.

Comments

If you're so altruistic, why pick Delaware?

[mrchaotica]

They talk about choosing this corporate structure (in part) to prevent themselves from exploiting tax loopholes, yet they incorporated in Delaware (rather than the state their main office is actually in -- New York, apparently), which could be construed as exploiting loopholes (at least regulatory, if not directly tax-related) in and of itself. What gives?

Re:If you're so altruistic, why pick Delaware?

[ganjadude]

no one wants to be located in NY, very unfriendly to business here (one of the reasons im leaving)

Re:If you're so altruistic, why pick Delaware?

[Etherwalk]

no one wants to be located in NY, very unfriendly to business here (one of the reasons im leaving)

Unfriendly to some business, but very friendly to other business. There are plusses and minuses. New York has well-developed case law on everything under the sun, and has a very competent commercial division of its courts that deals exclusively with million-dollar-plus commercial cases.

Re:If you're so altruistic, why pick Delaware?

[ganjadude]

too much cronyism here. NYC may be good for rich folks, but for the mom an d pops trying to start something, its not friendly at all

Re:If you're so altruistic, why pick Delaware?

[gatfirls]

"The Delaware General Corporation Law is the most advanced and flexible business formation statute in the nation. The Delaware Court of Chancery is a unique 215 year old business court that has written most of the modern U.S. corporation case law. Delaware’s State Government is business-friendly and accessible. The state’s Division of Corporation is a model state-of-the-art efficiency and the staff provides prompt, friendly and professional service to clients, attorneys, registered agents and others. These factors have all contributed to making Delaware a premier legal home to companies around the world."

Sure, there are tax benefits but a small start up is thinking ease of entry more than 'how do we hide our profits'.

In other words: I like to support my local grocer but if I have to wait in line for ten minutes I'll just go to the big box.

Re:If you're so altruistic, why pick Delaware?

[dj245]

They talk about choosing this corporate structure (in part) to prevent themselves from exploiting tax loopholes, yet they incorporated in Delaware (rather than the state their main office is actually in -- New York, apparently), which could be construed as exploiting loopholes (at least regulatory, if not directly tax-related) in and of itself. What gives?

Everybody incorporates in Delaware because it is easy and cheap to file the paperwork there. If you are selling things, or have employees, in almost any state, you have to register as a foreign corp/LLC in that state anyway, open worker's comp accounts, open tax accounts and pay income tax, etc. It really isn't cheating on tax, or a loophole, since you have to pay the corporate income tax in whatever state you made the income.

Re:If you're so altruistic, why pick Delaware?

[guises]

New York might be worse than... Where, exactly? I've lived in New York and New Orleans and it's like comparing apples and rotting oranges as far as corruption is concerned. The US has a lot of corruption problems, but among the big cities New York is better than... some. I'd put it in the middle somewhere.

Seriously, where is this non-corrupt paradise? Cleveland? I don't know squat about Cleveland. It's probably Cleveland.

Re:TL;DR:

[DutchUncle]

Good people go to bed earlier..

But . . . alone?

Re:TL;DR:

[ganjadude]

so what you are saying is there is now an opening in the market?

my guess?

[argStyopa]

My guess is that it's an effort to avoid the looming backlash as Congress (who barely even perceives the internet yet) starts to get waves of angry mail from constituents complaining that they've "lost our life savings on this Kick-Starter-thing and now they claim they're not responsible"....

I KNOW they're basically just an aggregator.
I KNOW "caveat emptor" and agree with it.
But when congress starts to see that $millions$ have vanished chasing projects* they're going to start looking for someone to hang, and since KS doesn't have the lobbying weight of Wall Street, they're going to look like an awfully-choice "example" that Congress can use to prove they're "doing something".
2016 is an election year, as you may remember.

Personally, I believe their next big move would be to ensure that members of Goldman-Sachs are sitting on their board. That seems to do wonders to ensure that they avoid government culpability or scrutiny...

*that probably should have never been born in the first place.

Re:my guess?

[alvinrod]

My guess is that it's an effort to avoid the looming backlash as Congress (who barely even perceives the internet yet) starts to get waves of angry mail from constituents complaining that they've "lost our life savings on this Kick-Starter-thing and now they claim they're not responsible"....

If that were true, Congress would have come down much harder on the banks and stock market already after the housing crisis.

They don't really care, but a few might use it as a point to extort^H^H^H^H^H^H get campaign donations from Kickstarter.

Maximizing profits is a public benefit

[trout007]

A company that maximizes profits in a free market is much better for society than one operating at a loss. A profitable company is meeting societies needs in a cost efficient way. A company operating at a loss is wasting resources.

Re:Maximizing profits is a public benefit

[BatesMethod]

I think you're conflating society's needs with those of the company's shareholders.

Ever heard of externalities?

Re:TL;DR:

[Anonymous Coward]

Weren't those people you accuse found innocent?

Just the First Step

[DERoss]

Becoming a public-benefit corporation is the first step towards becoming a non-profit, 501(c)(3) tax-exempt corporation. A private-benefit corporation cannot be tax-exempt.

Of course, this means much more than Kickstarter merely avoiding taxes. It also means it cannot compete with for-profit companies; any profits unrelated to its public-benefit purpose are taxed at a higher rate than for-profit corporations. This also means that it cannot endorse any candidate for election to public office and severely limits its ability to lobby government officials and agencies.

Wrong way around

[viperidaenz]

Why is a public benefit corporation not the default, with added paperwork and taxes for private-benefit corporations?

That way a company can actually "do the right thing", even if it may not directly benefit the shareholders.

Where are the teeth?

[piojo]

What happens if they don't fulfill this new mission? Where's the legal accountability? Or is this just a fancy version of a mission statement?

Your signature

[Thing 1]

Do you dispute that shills exist? That corporations and governments are actively paying people to pollute public forums? If I find out that a poster is a shill, does it not somewhat become a helpful, healthy goal to inform others?

I get what you're saying about wanting to cease the logical fallacies. But the evidence (government manuals, testimonials) that people are being paid to divert discussion exists. So, what do you think should be done about it?

Re:Your signature

[ganjadude]

debate the points. simple paid or not the points are there to be debated

Of course! Because as we all know from Drew Carey,

[Thing 1]

Cleveland Rocks!

If you REALLY want to be "for the public benefit".

[kaizendojo]

Start vetting your projects better. I've funded four projects, only one of which saw the light of day. And that one was almost as bad as the Kreyos I funded at Indiegogo. Quite frankly, I'm done with crowdfunding until IGG and KS start vetting instead of letting any scammer with a post box drop and a slick video to start a campaign.