Business Law Advice: Benefit Corporations for the Socially Conscientious Company

By: Andrew Tran

When you went into business, did you want your company to be about something more than just profits? If so, then the Benefit Corporation is something you need to consider.

Designed to be a hybrid between for-profit corporations and non-profit organizations, the Benefit Corporation requires corporate directors to consider a ‘triple bottom line’ of profits, people and the planet. Recently enacted by New York State on December 12, 2011 and adopted in a handful of other states, socially conscientious companies can now structure themselves as Benefit Corporations.

The Benefit Corporation is structured similarly to an ordinary corporation in that it has shareholders and aims to make a profit.  However, the Benefit Corporation also integrates features common to non-profits by requiring the Benefit Corporation to have the purpose of creating a “General Public Benefit,” such as preserving the environment or improving human health.  In addition, Benefit Corporations must meet certain standards as to employee treatment, environmental responsibility and community consciousness.

The advantage of structuring your company as a Benefit Corporation is that the board is no longer susceptible to shareholder derivative suits for choosing to be socially conscientious over profit maximization.  For example, in a takeover situation the board does not have to yield to the highest bidder but may chose the bidder most committed to responsible behavior.  Further, a Benefit Corporation can more easily accept outside funding while maintaining its commitment to societal good than a normal corporation could.

The Benefit Corporation structure is the brainchild of B Labs, a nonprofit organization dedicated to using the power of business to solve social and environmental problems.  As of today, there are over 500 Benefit Corporations in 60 different industries. Maryland, Vermont, New Jersey, Virginia, Hawaii, California and New York have passed Benefit Corporation legislation and a handful of other states are considering similar measures.

If your company is considering the Benefit Corporation structure, please feel free to contact our firm.

For additional Benefit Corporation resources, please visit:

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