Benefit Corporations
What they are
Why they matter
How they are formed
How are they treated
A legal alternative for socially conscious companies to legally declare
and implement those ideals that represent a material positive impact on
society and the environment.
Maximize Shared
Values
Maximize Shareholder
Value
Benefit Corporations
20th Century
21st Century
Also known as:
Benefit Corporations – general public benefit
Flexible Purpose Corporations – a single purpose
Maryland Benefit LLC – essentially the same as their benefit
corporation legislation (but allows for existing Maryland LLC’s to convert
without having to convert over to a corporation first)
L2C’s – low profit LLC’s with a charitable or educational purpose (some
interesting things going on with these entities with the IRS looking to treat these entities as
eligible to receive Foundation grants)
Benefit Corporations
Some of the key differences between a benefit corporation versus a
traditional corporation:
Traditional corporations:
•State Supreme Courts have long ruled that “a business corporation
is organized and carried on primarily for the profit of the
stockholders”.
•Board of director fiduciary duties to its shareholders lie in a duty of
loyalty and duty of care.
•Directors are held liable for corporate day-to-day decisions. A
“business judgment rule” is applied to ensure that actions take into
consideration shareholder value.
Benefit Corporations
Some of the key differences between a benefit corporation versus a
traditional corporation:
Benefit corporations:
•Board of directors are required to consider the effects of decisions
on all stakeholders.
•Responsible to measure its effectiveness (against a third party
standard*) of making a positive impact on society by publishing a
public report
*11 different standard setters, however gov’t does not influence standards; not
required to adopt a single standard, standards not required to be audited
Benefit Corporations
1,100+ B Corporations in 120 Industries in 40 Countries
Currently there are 27 states with benefit corporation legislation on the
books
Benefit Corporations
Benefit corporations are formed just like traditional corporations
according to the state specific legislative requirements. For
Pennsylvania, those requirement include the following:
File Articles of Incorporation prescribed by state law.
•Purpose
•Declare commitment to creating general public benefit
•Supermajority vote of shareholders (67%+)
•Assess itself against a third party standard
•Accountability – requires directors to consider society and environment in addition to
profit. Provides shareholders with a right of action to function with new purpose.
•Transparency – produce an annual Benefit Report (similar in form to the filing of
articles of incorporation) assessed against a third party standard
Benefit Corporations
Benefit corporations treated just like traditional corporations (C-Corp or
S-Corp).
There is no distinction in the eyes of the IRS or state departments of
revenue.
Benefit Corporations
Certified B Corporations
Certified B Corporations – certified by non-profit B Lab
Similar to LEED certification for green building
Fair Trade certification for coffee and chocolate
USDA Organic for milk products
Certified B Corporations v. Benefit Corporations
Comparisons
I am inspired by Greyston Bakery
Yonkers, New York
Hires & trains previously incarcerated individuals
Why B Corps Matter
B Corps
•Accelerate the evolution of capitalism
•Redefine success in business
•Concrete and measurable
•Build collective voice
•Better businesses
•Help us live to a higher purpose
•Stand for something, not against anything
Redefine success in business
Redefine success in
business
Bart Houlahan
https://www.youtube.com/watch?v=Hayf9Ob9fiQ
bimpactassessment.net / quick
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