Benefit corporation


In business, particularly in United States corporate law, a benefit corporation is a type of for-profit corporate entity whose goals include making a positive impact on society. Laws concerning conventional corporations typically do not define the "best interest of society", which has led to the belief that increasing shareholder value is the only overarching or compelling interest of a corporation. Benefit corporations explicitly specify that profit is not their only goal. An ordinary corporation may change to a benefit corporation merely by stating in its approved corporate bylaws that it is a benefit corporation.
A company chooses to become a benefit corporation in order to operate as a traditional for-profit business while simultaneously addressing social, economic, and/or environmental needs. For example, a 2013 study done by MBA students at the University of Maryland showed that one main reason businesses in Maryland had chosen to file as benefit corporations was for community recognition of their values. A benefit corporation's directors and officers operate the business with the same authority and behavior as in a traditional corporation, but are required to consider the impact of their decisions not only on shareholders but also on employees, customers, the community, and the local and global environment. For an example of what additional impacts directors and officers are required to consider, view the Maryland Code § 5-6C-07 – Duties of director. The nature of the business conducted by the corporation does not affect its status as a benefit corporation. Instead, it provides a justification for including public benefits in their missions and activities.
The benefit corporation legislation ensures that a director is required to consider other public benefits in addition to profit, preventing shareholders from using a drop in stock value as evidence for dismissal or a lawsuit against the corporation. Transparency provisions require benefit corporations to publish annual benefit reports of their social and environmental performance using a comprehensive, credible, independent, and transparent third-party standard. However, few of the states have included provisions for the removal of benefit corporation status or fines if the companies fail to publish benefit reports that comply with the state statutes.
Although approximately 36 jurisdictions now authorize the creation of benefit corporations, outside of those jurisdictions there are no legal standards that define what constitutes a benefit corporation. With jurisdictions that recognize this form of business, a benefit corporation is intended "to merge the traditional for-profit business corporation model with a non-profit model by allowing social entrepreneurs to consider interests beyond those of maximizing shareholder wealth." In jurisdictions where regulations have not been enacted, a benefit corporation need not be certified or audited by the third-party standard. Instead, it may use third-party standards solely as a rubric to measure its own performance.
Some research suggests a possible synergy between a benefit corporation and employee ownership.

History

United States

In April 2010, Maryland became the first U.S. state to pass benefit corporation legislation., 36 states and Washington, D.C., have passed legislation allowing for the creation of benefit corporations: and enhance corporate responsibility.
StateDate passedDate in effectLegislation
AlabamaDecember 31, 2020January 1, 2021
ArizonaApril 30, 2013December 31, 2014
ArkansasApril 19, 2013July 18, 2013
CaliforniaOctober 9, 2011January 1, 2012
ColoradoMay 15, 2013April 1, 2014
ConnecticutApril 24, 2014October 1, 2014,
DelawareJuly 17, 2013August 1, 2013
GeorgiaJuly 29, 2020January 1, 2021
FloridaJune 20, 2014July 1, 2014,
HawaiiJuly 8, 2011July 8, 2011
IdahoApril 2, 2015July 1, 2015
IllinoisAugust 2, 2012January 1, 2013
IndianaApril 30, 2015July 1, 2015
IowaJune 8, 2021June 8, 2021
KansasMarch 30, 2017July 1, 2017
KentuckyMarch 7, 2017July 1, 2017
LouisianaMay 31, 2012August 1, 2012
MaineJun 17, 2019Jun 17, 2019
MarylandApril 13, 2010October 1, 2010
MassachusettsAugust 7, 2012December 1, 2012
MinnesotaApril 29, 2014January 1, 2015,
MontanaApril 27, 2015October 1, 2015
NebraskaApril 2, 2014July 18, 2014
NevadaMay 24, 2013January 1, 2014
New HampshireJuly 11, 2014January 1, 2015
New JerseyJanuary 10, 2011March 1, 2011
New MexicoFebruary 18, 2020February 18, 2020,
New YorkDecember 12, 2011February 10, 2012
OhioDecember 18, 2020March 24, 2021
OklahomaApril 15, 2019November 1, 2019
OregonJune 18, 2013January 1, 2014
PennsylvaniaOctober 12, 2012January 1, 2013
Rhode IslandJuly 17, 2013January 1, 2014
South CarolinaJune 6, 2012June 14, 2012
TennesseeMay 20, 2015January 1, 2016
TexasJune 14, 2017September 1, 2017
UtahApril 1, 2014May 13, 2014
VermontMay 19, 2010July 1, 2011
VirginiaMarch 26, 2011July 1, 2011
Washington, D.C.February 8, 2013May 1, 2013
West VirginiaMarch 31, 2014July 1, 2014
WisconsinNovember 27, 2017February 26, 2018

Connecticut's benefit corporation law is the first to allow "preservation clauses", which allow the corporation's founders to prevent it from reverting to a 'For Profit' entity at the will of their shareholders.

Public benefit LLCs

A subset of benefit corporation, the public benefit LLC, allows for limited liability companies the same opportunities afforded to corporations under a state's benefit corporation law.
StateDate passedDate in effectLegislation
DelawareJuly 23, 2018August 1, 2018, 149th Gen. Assem.
KansasApril 18, 2019July 1, 2019
MarylandMay 19, 2011June 1, 2011,
OregonJune 18, 2013January 1, 2014
PennsylvaniaNovember 21, 2016February 19, 2017
UtahMarch 19, 2018March 19, 2018

Similar bills have been introduced in Connecticut and Illinois.

Social purpose corporations

Some states have passed legislation for creating social purpose corporations, which are more flexible in their legal requirements and responsibilities compared to benefit corporations.
StateDate passedDate in effectLegislation
CaliforniaOctober 9, 2011January 1, 2012 and for FPCs; revised and renamed as SPCs in 2015 via
FloridaJune 20, 2014July 1, 2014,
WashingtonMarch 30, 2012June 7, 2012

Low-profit limited liability companies

Low-profit limited liability companies were created to comply with the Internal Revenue Service program-related investments rules ) which allow most typically private foundations the ability to maintain tax-exempt status through investments in qualifying businesses and/or charities. They blend aspects of law regarding limited liability companies with aspects of non-profit law, but remain for-profit companies for tax purposes.
StateDate passedDate in effectLegislation
IllinoisAugust 4, 2009January 1, 2010
LouisianaJune 21, 2011June 21, 2011
MaineJune 8, 2009June 8, 2009
MichiganJanuary 15, 2009January 15, 2009
Rhode IslandJune 8, 2011January 1, 2012
UtahApril 1, 2013May 14, 2013
VermontApril 30, 2008April 30, 2008
WyomingFebruary 26, 2009July 1, 2009