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Open Core Ventures Handbook/🏢Company Formation/📄Step 2: Choose a legal entity structure

Step 2: Choose a legal entity structure

 
 
OCV companies are U.S. Delaware C-Corps. When applicable, we would also consider a Public Benefit Company (PBC) structure.

C-Corporations

C-corporations are the standard entity type for venture-backed companies because they allow for easy stock issuance and transfer, the ability to raise capital through the sale of stock, and provide limited liability for shareholders. Additionally, C-Corporations can have multiple classes of stock, which is useful for creating different levels of ownership and control.

Public Benefit Company

Public Benefit Companies are for-profit corporations created which are legally bound by inclusion in their corporate charter (certificate of incorporation) of a set of specific public benefits as part of their statement of purpose. When it's appropriate, OCV will consider incorporating a company as a public benefit company with the associated public good being associated with their stewardship of open-source software.
OCV will consider incorporating as a public benefit company when,
  • safeguarding the open source project is essential
  • the company is not leveraging more than one open source project
  • the consideration is business-driven
OCV companies incorporated as a public benefit company are referred to as OCV public benefit companies (OPBC).

Open Charter

Companies that incorporate under the public benefit company structure will adopt OCV’s Open Charter for their corporate charter. The Open Charter is a legally binding corporate formation document stating a company’s commitment to open source and includes a series of objectives for meeting its open source commitment.
Founders who elect to incorporate as a public benefit company will need to understand reporting responsibilities and consequences.

Biennial reporting requirements for public benefit companies

At least every two years, Delaware Public Benefit Companies must provide its stockholders with a report on the company’s promotion of the public benefit specified in its corporate charter.
The public benefit report should include information on:
  • Objectives established towards promotion of the public benefit
  • Standards adopted to measure progress in those objectives
  • Information measured in alignment with those standards
  • Assessment of the company’s success in meeting objectives
 
Additional resources on public benefit corporations: