Reprinted with permission from our friends at Bcorp, www.benefitcorp.net
What is a benefit corporation?
A benefit corporation is a new class of corporation that voluntarily meets higher standards of corporate purpose, accountability, and transparency.
Benefit Corporations: 1) have a corporate purpose to create a material positive impact on society and the environment; 2) are required to consider the impact of their decisions not only on shareholders but also on workers, community, and the environment; and 3) are required to make available to the public an annual benefit report that assesses their overall social and environmental performance against a third party standard.
Becoming a benefit corporation gives entrepreneurs and investors an additional choice when determining which corporate form is most suitable to achieve their objectives.
Does benefit corp affect our tax status?
It doesn't. Your company can still elect to be taxed as a C or S corp. Benefit corp status only affects requirements of corporate purpose, accountability, and transparency; everything else remains the same.
Do benefit corps have to get certified?
No. Benefit corporations do not have to become certified. Not by B Lab; not by anyone. Benefit corporations and Certified B Corps are different. You can learn more about that here.
How would becoming a benefit corp help my business?
- Provide clarity to directors and officers that their fiduciary duty includes creating a material positive impact on society and the environment, even in liquidity/sale scenarios;
- Offer legal protection to directors and officers to consider the non-financial interests of their workforce, community, and the environment when making decisions, even in liquidity/sale scenarios;
- Help maintain mission over time by 1) expanding shareholder rights to enforce this expanded definition of fiduciary duty and standard of consideration; and 2) requiring a 2/3 super-majority vote of shareholders to remove these higher standards; and 3) providing the opportunity to name and enforce pursuit of one or more specific public benefit purposes;
- Create a marketing opportunity to differentiate the business as a new class of corporation required by law to benefit society as well as shareholders.
Why are benefit corps important?
Business leaders need to be able to satisfy the increasing demands of investors, employees and customers that corporations serve both shareholders and society, considering the impact of their decisions on multiple stakeholders rather than maintaining a singular focus on short term financial returns.
In addition, benefit corps create a new and useful corporate structure that meets the needs of business leaders and investors whose core mission it to create a material postive impact on society and the environment.
Without increasing regulation or impacting state budgets, benefit corporations:
- Remove legal impediments preventing businesses and investors from making decisions to use sustainability and social innovation as a competitive advantage, particularly in liquidity/sale scenarios;
- Legitimize and accelerate development of a more inclusive and sustainable economy by providing legal recognition for businesses that adopt higher standards of corporate purpose, accountability, and transparency;
- Rebuild public trust in business by demonstrating that businesses are willing to be held accountable to create value for both shareholders and society.
How do I become a benefit corporation?
If you are starting a new company, you can simply incorporate as a benefit corporation in any state where legislation has been passed. The procedure for incorporation is nearly identical to that followed for any other corporate structure. For state by state instructions click here.
If you have an existing company, you can elect to become a benefit corporation by amending your governing documents. Amendment requires a 2/3 super-majority vote of shareholders in most states. The procedure for filing amendments with the state is identical to that followed for any other corporate structure. For state by state instructions click here.
In what states can our company become a benefit corp?
Benefit corporation legislation is effective in AR, CA, CO, DC, DE, FL, HI, IL, LA, MA, MD, NE, NJ, NV, NY, OR, PA, RI, SC, VA, VT and WV and is moving forward in several others. For state by state information, click here.