The Social Promise of Hybrid Entities

Authors

Frederick M. Spight Jr.Follow

Abstract

Many Historically Black Colleges and Universities (HBCUs) are struggling to stay afloat. These historic, and historically underfunded, institutions suffer from a chronic shortage of resources, leading to the notable closures of schools, like Concordia College. Some critics question the modern place of the HBCU as a relic of a bygone era. This article argues, however, that HBCUs are worth sustaining and provides the legal tool to do so: the hybrid entity. 

Hybrid entities arose from the social enterprise movement, which sought to harness the power of both nonprofit and for-profit organizations. Operating under the philosophy of “doing well, while doing good,” these firms have grown in popularity over the last several decades. The resulting philosophy and business organization gave rise to the hybrid business entity that blends aspects of non-profit and for-profit enterprises—such as the benefit corporation and the low-profit limited liability company)—that aim to solve societal problems, while also turning a profit. Some have critiqued the hybrid entity as the worst of both worlds—entities that are bound to serve an altruistic purpose while also not receiving favorable tax benefits of the traditional tax-exempt entity—or they are truly elaborate marketing schemes. These criticisms, however, fail to capture the true value of the hybrid model and its potential applications. 

This Article proposes and advocates for future utilization of the hybrid entity as a tool to supplement funding for underfunded institutions of higher education. By specifically focusing on HBCUs, this Article aims to tackle the historic underfunding of HBCUs while also creating a framework that can be applied to any tax-exempt institution of higher education. Ultimately, this framework continues in the tradition of the social enterprise, utilizing legal structures from the for-profit world for the utilization of traditional nonprofit purposes.