Since the hybrid law was passed in 2008, a steady increase of such businesses has been recorded. As a result, several entrepreneurs combine both approaches for-profit and non-profit making. On the one hand, it has received support from individuals who believe the structure have enabled the creation of social conscious ventures. On the other hand, the hybrid business systems have faced several criticisms. The critics cite that hybrid businesses create more conflicts than they can solve and hence should not be allowed. However, based on the benefits attached to these businesses towards the society, a push to exempt taxes has been initiated (Lane 1). Nonetheless, there is no any scholarly work that clearly defines these types of businesses deserve tax exemptions or preferences.
The hybrid structure should not receive tax preferences, which were previously enjoyed by charitable organizations unless under special extreme. The initiative to exempt tax may have adverse effects on the public entities, charitable firms, and mostly on the hybrids. Hence, to adopt tax exemptions, a clear definition of benefit to the public from the entity should be fomulated (Lane 2). Additionally, it is important to ensure that those business that enjoy tax relieve should offer significant benefits to the public to avoid overburdening the government or undermining the public support for tax preferences, which are only enjoyed by nonprofit organizations (Lane 4). Thus, to achieve maximum benefits for all businesses, it is important to ensure that laws that recognize the hybrids without aggravating their weaknesses are enacted.
Furthermore, to recognize the nonprofit businesses or entities that contribute towards the public, nonprofit B lab was created under the benefit corporation. The underlying reason was to create non-profit organizations that meet certain criteria for environmental and social performance, with certifications, to benefit from tax preferences. Exempting the hybrid businesses from taxes may play a significant role in expanding the efforts to address the needs of the society, which should encourage entrepreneurs to create new hybrid entities (Lane 14). However, it would be wrong to extend tax preferences to non-profit entities since the action could undermine the very benefits its creators had while developing the idea. The tax exemption is not a solution to the economic challenges and if wrongly applied, it could have devastating effects.
Businesses that seek to address the societal issues have several opportunities under the tax code and revenue rulings that could increase efficiency in their operations. The hybrid whose mission is to provide renewable energy, affordable housing, or find cures for various diseases have certain tailored-made tax advantages that allow them to fulfill their purpose.
The hybrid organizations and other businesses should have equal opportunities, even in bidding preferences to avoid undue competition. In the Cook County, a contract would be awarded to a social entity if the bid price is not higher than 5 percent of the lowest bidder of the non-social entity. Therefore, both types of organizations should have equal opportunities since they have a positive impact on the society (Lloyd 1). For instance, the non-social organization can contribute significantly through taxes while the other hybrid entity would drive much of its resources and benefits towards social growth. Thus, to ensure fair competition, all the entities should have the same platform without any undue preferences on bid procurement..
Lane, Marc J. Cook County Gives Social Enterprises an Edge! Nov 2017. hwww.marcjlane.com/news/2017/11/01/2017-lane-reports/cook-county-gives-social-enterprises-an-edge/. Accessed 13 Apr 2019.
Lloyd Mayer and Joseph Ganahi. Taxing Social Enterprise. Stanford Law Review, 2014.