View source for Finance:Benefit corporation

{{short description|Type of for-profit entity}}
{{Corporate law|USA}}
[[File:Benefit_corporation_laws_in_the_United_States.svg|thumb|right|Map of U.S. states which have passed laws allowing the formation of benefit corporations.<br>
<br>
{{Color sample|#000080|description=navy blue}} Passed into law.<br>
{{Color sample|#d0d0d0|description=light grey}} No law on the books.<br>
{{Color sample|#808000|description=goldenrod}} Bill failed a vote in the state's legislature.]]
In business, and only 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 the corporation", which has led some to believe that increasing shareholder value (profits and/or share price) is the only overarching or compelling interest of a corporation.<ref>{{Cite news|url=https://www.washingtonpost.com/business/economy/businesses-focus-on-maximizing-shareholder-value-has-numerous-costs/2013/09/05/bcdc664e-045f-11e3-a07f-49ddc7417125_story.html|title=Businesses' focus on maximizing shareholder value has numerous costs|last=Pearlstein|first=Steven|date=September 6, 2013|newspaper=The Washington Post|access-date=December 3, 2018}}</ref> Benefit corporations explicitly specify that profit is not their only goal.  Their activities may or may not differ much from traditional corporations.<ref name=":02" /> An ordinary corporation may change to a benefit corporation merely by stating in its approved corporate bylaws that it is a benefit corporation.<ref name=":02" />

A business may choose to file as a benefit corporation instead of a traditional C corporation for many reasons; 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.<ref name=":0">{{Cite web|url=https://www.slideshare.net/changematters/maryland-benefit-corporations-analysis-full-report|title=Maryland Benefit Corporation Act: The State of Social Enterprise in Maryland|last=Kincaid |display-authors=0 |first=Amy|date=January 1, 2013|website=Slideshare|access-date=October 9, 2019}}</ref> 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 local and global environment. For an example of what additional impacts directors and officers are required to consider, view the 2015 Maryland Code § 5-6C-07 – Duties of director. The nature of the business conducted by the corporation does not affect their status as a benefit corporation, instead providing them protection for including public benefits in their missions and activities.

Deciding to become a benefit corporation is the choice of a company that wants to make a profit while simultaneously addressing social, economical, and environmental needs, or to operate as a traditional for-profit business corporation model. Both have their own benefits and costs.<ref name=":1">{{Cite book|last=Bagley|first=Constance E.|title=The Entrepreneur's Guide to Law & Strategy, fifth edition|publisher=Cengage Learning, Inc.|year=2018|isbn=978-1-285-42849-9|location=Boston, MA|pages=56–58}}</ref>

Shareholders typically judge a company's well-being on its long-term financial success, in addition to public perception and quality of product, but in recent decades quarterly trading reporting has led to hyper-focus on short-term gains. As such, the perception that corporate directors are legally bound to maximize shareholder value has grown, although it is not true.<ref>{{Cite news|url=https://www.washingtonpost.com/business/economy/businesses-focus-on-maximizing-shareholder-value-has-numerous-costs/2013/09/05/bcdc664e-045f-11e3-a07f-49ddc7417125_story.html|title=Businesses' focus on maximizing shareholder value has numerous costs|last=Pearlstein|first=Steven|date=September 6, 2013|newspaper=The Washington Post}}</ref> 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 removal of benefit corporation status or fines if the companies fail to publish benefit reports that comply with the state statutes.<ref>{{Cite journal |last=Murray |first=J. Haskell |date=2022 |title=Enforcing Benefit Corporation Reporting |url=https://ir.law.utk.edu/cgi/viewcontent.cgi?article=1617&context=transactions |journal=Transactions: The Tennessee Journal of Business Law |issue=23 |pages=505}}</ref>

There are around 12 third-party standards that satisfy the reporting requirements of most benefit corporation statutes.{{citation needed|date=September 2019}} A benefit corporation need not be certified or audited by the third-party standard. Instead, it may use third-party standards solely as a [[Religion:Rubric|rubric]] to measure its own performance. In this case, some authors have examined and pointed out that in the current 36 states who recognize benefit corporations as legal business forms the law regarding the requirement of certifications for operation differs from state to state.<ref>{{Cite web|url=https://benefitcorp.net/policymakers/state-by-state-status|title=State by State Status of Legislation {{!}} Benefit Corporation|website=benefitcorp.net|access-date=March 26, 2020}}</ref> For example, in the state of Indiana, there is no requirement of certifications from a third party needed to operate as a benefit corporation.<ref name=":2">{{Cite web|url=https://www.bloominglaw.com/blog/2017/9/21/indiana-benefit-corporations-the-what-how-and-whether-of-forming-a-b-corp|title=Indiana Benefit Corporations: The What, How and Whether of Forming a B-Corp.|website=Freitag & Martoglio|date=September 21, 2017 |language=en-US|access-date=March 25, 2020}}</ref> It has also been suggested that other organizations that choose to operate under the business formation of a benefit corporation may also want to engage in receiving a B Corp certification from a third party, such as [[Organization:B Lab|B Lab]].<ref>{{Cite web|url=https://bcorporation.net/about-b-lab|title = About B Lab &#124; Certified B Corporation}}</ref> Other research promotes the synergy between a benefit corporation and employee ownership.<ref name="Kurland CMR 2018">{{cite journal |last1=Kurland |first1=Nancy |title=ESOP plus benefit corporations: Ownership culture with benefit accountability |journal=California Management Review |date=2018 |volume=60 |issue=4 |pages=51–73 |doi=10.1177/0008125618778853 |s2cid=158057120 |url=https://doi.org/10.1177%2F0008125618778853}}</ref>

As a matter of law, in the 36 states who recognize this type of business form, a benefit corporation is used "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."<ref name=":02">{{Cite web|url=https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=4761&context=clr|title=Benefit Corporations: A Proposal for Assessing Liability in Benefit Enforcement Proceedings|last=Lee|first=Jaime|date=May 2018|website=scholarship.law.cornell.edu/|access-date=March 25, 2020}}</ref>

==History==
In April 2010, Maryland became the first U.S. state to pass benefit corporation legislation.<ref>{{Cite news|url=https://www.xconomy.com/wisconsin/2017/11/29/joining-trend-wi-creates-new-business-entity-benefit-corporations/|title=Xconomy: Joining Trend, WI Creates New Business Entity: Benefit Corporations|date=November 2, 2017|work=Xconomy|access-date=October 19, 2018|language=en-US}}</ref> {{Asof|2018|3}}, 36 states and Washington, D.C., have passed legislation allowing for the creation of benefit corporations:<ref>{{cite web |url=http://benefitcorp.net/policymakers/state-by-state-status |title=State by State Status of Legislation |publisher=[[Organization:B Lab|B Lab]] |access-date=July 4, 2017}}</ref>

{|class="wikitable sortable plainrowheaders" style="text-align: left;"
!State!!Date passed!!Date in effect!!Legislation
|-
|Arizona||April 30, 2013||December 31, 2014||[http://www.azleg.gov/DocumentsForBill.asp?Bill_Number=SB1238&Session_ID=110 SB 1238] {{Webarchive|url=https://web.archive.org/web/20160304093908/http://www.azleg.gov/DocumentsForBill.asp?Bill_Number=SB1238&Session_ID=110 |date=March 4, 2016 }}
|-
|Arkansas||April 19, 2013||July 18, 2013||[http://www.arkleg.state.ar.us/assembly/2013/2013R/Pages/BillInformation.aspx?measureno=HB1510 HB 1510]
|-
|California||October 9, 2011||January 1, 2012||[http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201120120AB361 AB 361]
|-
|Colorado||May 15, 2013||April 1, 2014||[http://www.leg.state.co.us/clics/clics2013a/csl.nsf/fsbillcont3/A29836D875EF946987257AEE00574AC0?open&file=1138_enr.pdf HB 13-1138]
|-
|Connecticut||April 24, 2014||October 1, 2014||[http://www.cga.ct.gov/asp/cgabillstatus/cgabillstatus.asp?selBillType=Bill&bill_num=SB00023&which_year=2014 SB 23], [http://www.cga.ct.gov/asp/cgabillstatus/cgabillstatus.asp?selBillType=Bill&bill_num=5597&which_year=2014&SUBMIT1.x=0&SUBMIT1.y=0 HB 5597 Section 140]
|-
|Delaware||July 17, 2013||August 1, 2013||[http://www.legis.delaware.gov/BillDetail?LegislationId=22350 SB 47]
|-
|Florida||June 20, 2014||July 1, 2014||[http://www.flsenate.gov/Session/Bill/2014/0654 SB 654], [http://www.myfloridahouse.gov/Sections/Bills/billsdetail.aspx?BillId=51780 HB 685]
|-
|Hawaii||July 8, 2011||July 8, 2011||[http://www.capitol.hawaii.gov/session2011/bills/SB298_CD1_.htm SB 298]
|-
|Idaho||April 2, 2015||July 1, 2015||[https://web.archive.org/web/20150929020443/http://www.legislature.idaho.gov//legislation/2015/S1076.htm SB 1076]
|-
|Illinois||August 2, 2012||January 1, 2013||[http://www.ilga.gov/legislation/BillStatus.asp?DocNum=2897&GAID=11&DocTypeID=SB&LegId=63455&SessionID=84 SB 2897]
|-
|Indiana||April 30, 2015||July 1, 2015||[http://iga.in.gov/static-documents/e/6/c/c/e6cc8ccd/HB1015.01.INTR.pdf HB 1015]
|-
|Iowa<ref>[https://www.iowabusinesslawyer.com/benefit-corporation-vs-public-benefit-corporations/ "Benefit Corporations vs Public Benefit Corporations in Iowa"] ''Iowa Business Lawyer.'' "an Iowa 'benefit corporation' may have both a profit and public benefit motive while an Iowa 'public benefit corporation' is a charitable non-profit organization."</ref>||June 8, 2021||June 8, 2021||[https://www.legis.iowa.gov/legislation/BillBook?ga=89&ba=HF844 HB 844]
|-
|Kansas||March 30, 2017||July 1, 2017||[https://openstates.org/ks/bills/2017-2018/HB2153/ HB 2153]
|-
|Kentucky||March 7, 2017||July 1, 2017||[http://www.lrc.ky.gov/record/17RS/HB35.htm HB 35] {{Webarchive|url=https://web.archive.org/web/20170607154212/http://www.lrc.ky.gov/record/17RS/HB35.htm |date=June 7, 2017 }}
|-
|Louisiana||May 31, 2012||August 1, 2012||[http://www.legis.la.gov/legis/ViewDocument.aspx?d=809858&n=HB1178%20Act HB 1178]
|-
|Maryland||April 13, 2010||October 1, 2010||[http://mgaleg.maryland.gov/webmga/frmMain.aspx?tab=subject3&ys=2010rs/billfile/sb0690.htm SB 690/HB 1009]
|-
|Massachusetts||August 7, 2012||December 1, 2012||[https://malegislature.gov/Laws/SessionLaws/Acts/2012/Chapter238 2012 Acts, Chapter 238]
|-
|Minnesota||April 29, 2014||January 1, 2015||[https://www.revisor.mn.gov/bills/text.php?number=SF2053&version=0&session=ls88&session_year=2014&session_number=0 SF 2053], [https://www.revisor.mn.gov/bills/text.php?number=HF2582&version=0&session=ls88&session_year=2014&session_number=0 HF 2582]
|-
|Montana||April 27, 2015||October 1, 2015||[http://laws.leg.mt.gov/legprd/LAW0203W$BSRV.ActionQuery?P_SESS=20151&P_BLTP_BILL_TYP_CD=HB&P_BILL_NO=258&P_BILL_DFT_NO=&P_CHPT_NO=&Z_ACTION=Find&P_ENTY_ID_SEQ2=&P_SBJT_SBJ_CD=&P_ENTY_ID_SEQ= HB 2458]
|-
|Nebraska||April 2, 2014||July 18, 2014||[http://nebraskalegislature.gov/FloorDocs/103/PDF/Slip/LB751.pdf LB 751]
|-
|Nevada||May 24, 2013||January 1, 2014||[https://nelis.leg.state.nv.us/77th2013/App#/77th2013/Bill/Overview/AB89 AB 89] {{Webarchive|url=https://web.archive.org/web/20150607122453/https://nelis.leg.state.nv.us/77th2013/App#/77th2013/Bill/Overview/AB89 |date=June 7, 2015 }}
|-
|New Hampshire||July 11, 2014||January 1, 2015||[http://www.gencourt.state.nh.us/legislation/2014/SB0215.pdf SB 215]
|-
|New Jersey||January 10, 2011||March 1, 2011||[http://www.njleg.state.nj.us/2010/Bills/A4000/3595_I1.PDF S 2170] {{Webarchive|url=https://web.archive.org/web/20150926225023/http://www.njleg.state.nj.us/2010/Bills/A4000/3595_I1.PDF |date=September 26, 2015 }}
|-
|New Mexico||February 18, 2020||February 18, 2020||[https://www.nmlegis.gov/Sessions/20%20Regular/final/HB0118.pdf HB 118], [https://www.nmlegis.gov/Legislation/Legislation?Chamber=H&LegType=B&LegNo=118&year=20 Bill History]
|-
|New York||December 12, 2011||February 10, 2012||[http://open.nysenate.gov/legislation/bill/A4692A-2011 A4692-a and S79-a]
|-
|Oregon||June 18, 2013||January 1, 2014||[https://olis.leg.state.or.us/liz/2013R1/Measures/Text/HB2296/Enrolled HB 2296]{{Dead link|date=October 2023 |bot=InternetArchiveBot |fix-attempted=yes }}
|-
|Pennsylvania||October 12, 2012||January 1, 2013||[http://www.legis.state.pa.us/cfdocs/billinfo/bill_history.cfm?syear=2011&sind=0&body=H&type=B&bn=1616 HB 1616]
|-
|Rhode Island||July 17, 2013||January 1, 2014||[http://webserver.rilin.state.ri.us/BillText13/HouseText13/H5720.pdf HB 5720]
|-
|South Carolina||June 6, 2012||June 14, 2012||[http://www.scstatehouse.gov/billsearch.php?billnumbers=4766&session=119&summary=B HB 4766]
|-
|Tennessee||May 20, 2015||January 1, 2016||[http://wapp.capitol.tn.gov/apps/BillInfo/Default.aspx?BillNumber=HB0767&ga=109 HB 0767/SB 0972]
|-
|Texas||June 14, 2017|| September 1, 2017 ||[http://www.legis.state.tx.us/tlodocs/85R/billtext/html/HB03488I.htm HB 3488]
|-
|Utah||April 1, 2014||May 13, 2014||[http://le.utah.gov/~2014/bills/static/SB0133.html SB 133]
|-
|Vermont||May 19, 2010||July 1, 2011||[http://www.leg.state.vt.us/docs/2010/Acts/ACT113.pdf S 263]
|-
|Virginia||March 26, 2011||July 1, 2011||[http://lis.virginia.gov/cgi-bin/legp604.exe?ses=111&typ=bil&val=hb2358&Submit2=Go HB 2358]
|-<!-- Washington state does not have benefit corporations. It created social purpose corporations instead, which is has a separate Wikipedia article and is mentioned below. Do not add it to this table. -->
|Washington, D.C.||February 8, 2013||May 1, 2013||[http://dcclims1.dccouncil.us/images/00001/20130124110730.pdf B 19-058] {{Webarchive|url=https://web.archive.org/web/20150927032728/http://dcclims1.dccouncil.us/images/00001/20130124110730.pdf |date=September 27, 2015 }}
|-
|West Virginia||March 31, 2014||July 1, 2014||[http://www.legis.state.wv.us/Bill_Status/bills_text.cfm?billdoc=SB202%20INTR.htm&yr=2014&sesstype=RS&i=202 SB 202]
|-
|Wisconsin||November 27, 2017||February 26, 2018||[https://docs.legis.wisconsin.gov/2017/proposals/sb298 SB298] [https://docs.legis.wisconsin.gov/2017/related/acts/77 Act 77]
|-
|}

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.<ref>{{Cite news|url=http://www.ctnewsjunkie.com/archives/entry/social_entrepreneurs_celebrate_new_corporate_structure|title=20 Connecticut Social Entrepreneurs Convert Their Companies to Benefit Corporations|last=Stuart|first=Christine|date=October 1, 2014|work=CT News Junkie|access-date=July 17, 2017}}</ref>

Illinois established a new type of entity called the "benefit LLC", making the state the first to allow [[Social:Limited liability company|limited liability companies]] the same opportunities afforded to Illinois corporations under the state's benefit corporation law.<ref>S.B. 2358, 98th Gen. Assem. (Ill. 2013).</ref><ref>{{Cite report | date=April 2013 |title= Six Month Report|url= http://illinoistaskforce.files.wordpress.com/2013/04/task-force-six-month-report_4-22-13.pdf |publisher=Governor's Task Force on Social Innovation, Entrepreneurship, and Enterprise }}</ref>

In December 2015, the Italian Parliament passed legislation recognizing a new kind of organization, named ''Società Benefit'', which was directly modeled after benefit corporations in the United States. This made Italy the first country in the world to make this legal status available across its entire territory.<ref>Italian financial Act for 2016– L. nr. 208/2015</ref><ref>{{cite web | author=Daniel | title=Italian Parliament approves Benefit Corporation legal status | location=Amsterdam, Netherlands | publisher=B Lab | date=December 22, 2015 | url=http://bcorporation.eu/blog/italian-parliament-approves-benefit-corporation-legal-status | access-date=July 19, 2017 | archive-url=https://web.archive.org/web/20170704231038/http://bcorporation.eu/blog/italian-parliament-approves-benefit-corporation-legal-status | archive-date=July 4, 2017 | url-status=dead }}</ref><ref>{{cite journal | title=Disposizioni per la formazione del bilancio annuale e pluriennale dello Stato | journal=Gazzetta Ufficiale | date=December 30, 2015 | publisher=Republic of Italy |url=http://www.gazzettaufficiale.it/eli/id/2015/12/30/15G00222/sg | language=it | access-date=July 19, 2017}}</ref><ref>{{Cite web|url=http://www.ecclblog.law.ed.ac.uk/2017/03/31/the-legacy-of-b-lab-italys-societa-benefit/|title=The Legacy of B Lab: Italy's Società Benefit {{!}} The ECCLblog|date=March 31, 2017|publisher=University of Edinburgh|language=en-US|access-date=October 19, 2018}}</ref><ref>{{Cite news|url=https://www.lifegate.com/people/news/what-are-benefit-corporations|title=What are benefit corporations, the companies doing good for society – LifeGate|date=July 1, 2017|work=LifeGate|access-date=October 19, 2018|language=it-IT}}</ref>

In 2018, Colombia introduced benefit corporation legislation.<ref>{{Cite web |date=2022-06-08 |title=The Dark Side of Colombia's Benefit Corporation |url=https://www.law.ox.ac.uk/business-law-blog/blog/2022/06/dark-side-colombias-benefit-corporation |access-date=2022-08-02 |website=Oxford Law Faculty |language=en}}</ref> In May 2018, the leader of the British Columbia Green Party introduced a bill to amend the Business Corporations Act to incorporate benefit companies in British Columbia, Canada.<ref>{{Cite news|url=https://www.thestar.com/vancouver/2018/05/02/provincial-green-party-eyes-making-bc-the-first-canadian-jurisdiction-to-recognize-benefit-corporations.html|title=Provincial Green Party eyes making B.C. the first Canadian jurisdiction to recognize 'benefit corporations' {{!}} The Star|website=Toronto Star|date=May 2, 2018|language=en|access-date=September 11, 2019|last1=McKeen|first1=Alex}}</ref>

Washington created [[Finance:Social purpose corporation|social purpose corporation]]s in 2012 with a similar focus and intent.<ref>{{Cite web|url=https://apps.leg.wa.gov/billsummary/?BillNumber=2239&Year=2012&Initiative=false|title=Washington State Legislature|website=apps.leg.wa.gov}}</ref><ref>{{cite web|title=Social Purpose Corporation|url=http://www.sos.wa.gov/corps/SocialPurposeCorporation.aspx|website=Washington Secretary of State|access-date=August 10, 2016|quote=As of June 7, 2012, a new type of profit corporation will exist in Washington. ..[T]his law...would allow a corporation's shareholders and directors to put a social purpose (such as saving the environment or saving the whales) above the purpose of making a profit.}}</ref>

==Differences from traditional corporations==
Historically, U.S. corporate law has not been structured or tailored to address the situation of for-profit companies that wish to pursue a social or environmental mission.<ref>{{cite web|title=Balancing purpose and profit: Legal mechanisms to lock in social mission for "profit with purpose" businesses across the G8|url=http://www.trust.org/contentAsset/raw-data/1d3b4f99-2a65-49f9-9bc0-39585bc52cac/file|website=Trust Law|access-date=September 3, 2015}}</ref> While corporations generally have the ability to pursue a broad range of activities, corporate decision-making is usually justified in terms of creating long-term shareholder value.

The idea that a corporation has as its purpose to maximize financial gain for its shareholders was first articulated in ''Dodge v. Ford Motor Co.'' in 1919.<ref>{{Cite news|url=https://www.the-american-interest.com/2018/03/21/the-corporate-conscience/|title=The Corporate Conscience – The American Interest|date=March 2, 2018|work=The American Interest|access-date=October 26, 2018|language=en-US}}</ref> Over time, through both law and custom, the concept of "[[Finance:Shareholder primacy|shareholder primacy]]" has come to be widely accepted. This was reaffirmed in 2010 for [[Company:Delaware General Corporation Law|Delaware corporations]] by the case {{cite court |litigants=eBay Domestic Holdings, Inc. v. Craig Newmark, et al. |opinion=3705-CC |pinpoint=61 |court=Del. Ch. |year=2010 |url=http://courts.delaware.gov/Opinions/Download.aspx?id=143440 }}, in which the Delaware Chancery Court stated that a non-financial mission that "seeks not to maximize the economic value of a for-profit Delaware corporation for the benefit of its stockholders" is inconsistent with directors' fiduciary duties. However, the fiduciary duties do not list profit or financial gains specifically, and to date no corporate charters have been written that identify profit as one of those duties.

In the ordinary course of business, decisions made by a corporation's directors are generally protected by the business judgment rule, under which courts are reluctant to second-guess operating decisions made by directors. In a takeover or change of control situation, however, courts give less deference to directors' decisions and require that directors obtain the highest price in order to maximize shareholder value in the transaction. Thus a corporation may be unable to maintain its focus on social and environmental factors in a change of control situation because of the pressure to maximize shareholder value.

Mission-driven businesses, impact investors, and social entrepreneurs are constrained by this legal framework, which is not equipped to accommodate for-profit entities whose mission is central to their existence.

Even in states that have passed "constituency" statutes, which permit directors and officers of ordinary corporations to consider non-financial interests when making decisions, legal uncertainties make it difficult for mission-driven businesses to know when they are allowed to consider additional interests. Without clear case law, directors may still fear civil claims if they stray from their fiduciary duties to the owners of the business to maximize profit.<ref name=":0" />

By contrast, benefit corporations expand the fiduciary duty of directors to require them to consider non-financial stakeholders as well as the interests of shareholders.<ref>{{cite web |title= Emerging Legal Forms Allow Social Entrepreneurs to Blend Mission And Profits|url= http://www.triplepundit.com/2014/03/emerging-legal-forms-allow-social-entrepreneurs-blend-mission-profits/ |author=Marc J. Lane |date= March 11, 2014|publisher=Triple Pundit }}</ref> This gives directors and officers of mission-driven businesses the legal protection to pursue an additional mission and consider additional stakeholders.<ref>{{cite web |url = http://www.aspenpublishers.com/product.asp?catalog_name=Aspen&category_name=&product_id=0735598088&promoID=EM95&cookie_test=1 |title = Representing Corporate Officers and Directors | author = Marc J. Lane | publisher= Aspen Publishers: Wolters Kluwer Law & Business |access-date = August 8, 2012}}</ref><ref>{{cite web |url = http://www.americanbar.org/publications/young_lawyer/2011-12/december_2011/social_enterprises_new_business_form_driving_social_change.html |title = Social Enterprises: A New Business Form Driving Social Change | author = Marc J. Lane | publisher= The Young Lawyer |access-date = November 18, 2014}}</ref> The enacting state's benefit corporation statutes are placed within existing state corporation codes so that the codes apply to benefit corporations in every respect except those explicit provisions unique to the benefit corporation form.

==Provisions==
Typical major provisions of a benefit corporation are:<ref name=maryland>{{cite web|title=Maryland First State in Union to Pass Benefit Corporation Legislation|url=http://www.csrwire.com/press_releases/29332-Maryland-First-State-in-Union-to-Pass-Benefit-Corporation-Legislation|publisher=CSRWire USA|date=April 14, 2010}}</ref>

'''Purpose'''
* Shall create general [[Philosophy:Common good|public benefit]].
* Shall have the right to name specific public benefit purposes
* The creation of public benefit is in the best interests of the benefit corporation.

'''Accountability'''
* Directors' duties are to make decisions in the best interests of the corporation
* Directors and officers shall consider effect of decisions on shareholders and employees, suppliers, customers, community, environment (together the "stakeholders")

'''Transparency'''
* Shall publish annual Benefit Report in accordance with recognized third party standards for defining, reporting, and assessing social and environmental performance
* Benefit Report delivered to: 1) all shareholders; and 2) public website with exclusion of proprietary data

'''Right of action'''
* Only shareholders and directors have right of action
* Right of action can be for 1) violation of or failure to pursue general or specific public benefit; 2) violation of duty or standard of conduct

'''Change of control/purpose/structure'''
* Shall require a minimum status vote which is a 2/3 vote in most states, but slightly higher in a few states

Benefit corporations are treated like all other corporations for tax purposes.<ref name=maryland />

==Benefits==
Benefit corporation laws address concerns held by entrepreneurs who wish to raise growth capital but fear losing control of the social or environmental mission of their business. In addition, the laws provide companies the ability to consider factors other than the highest purchase offer at the time of sale, in spite of the ruling on ''Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc.'' Chartering as a benefit corporation also allows companies to distinguish themselves as businesses with a social conscience, and as one that aspires to a standard they consider higher than [[Finance:Profit maximization|profit-maximization]] for shareholders.<ref>[http://neweconomicsinstitute.org/publications/new-economy-movement New-Economy Movement] {{webarchive |url=https://web.archive.org/web/20110807214604/http://neweconomicsinstitute.org/publications/new-economy-movement |date=August 7, 2011 }} article by Gar Alperovitz, also appeared in the June 13, 2011, edition of The Nation</ref> Yvon Chouinard, founder of Patagonia, has written "Benefit corporation legislation creates the legal framework to enable companies like Patagonia to stay mission-driven through succession, capital raises, and even changes in ownership, by institutionalizing the values, culture, processes, and high standards put in place by founding entrepreneurs."<ref>{{Cite web|url=https://www.patagonia.com/stories/benefit-corporation-update-patagonia-passes-b-impact-assessment-improves-score-to-116/story-17871.html|title=Benefit Corporation Update: Patagonia Passes B Impact Assessment, Improves Score to 116 - Patagonia|date=October 24, 2014|website=www.patagonia.com}}</ref>

Oregon House Bill 3572, signed by the governor of Oregon in July 2023,<ref>{{Cite web |title=HB 3572 Enrolled |url=https://olis.oregonlegislature.gov/liz/2023R1/Measures/Overview/HB3572 |access-date=26 December 2023 |website=Oregon State Legislature}}</ref> allows public contracting agencies to award contracts to benefit corporations if the goods and services are not more than 5% higher than the goods and services available from another company.<ref>{{Cite web |last=Krizanac |first=Antonija |date=14 November 2023 |title=Building in 2024: Recent Oregon Legislative Changes Impacting the Construction Industry |url=https://www.dwt.com/blogs/government-contracts-insider/2023/11/oregon-construction-contract-law-changes-2023 |access-date=26 December 2023 |website=Davis Wright Tremaine LLP}}</ref> 

== Benefit corporation vs. certified benefit corporation ==
There is a difference between being filing as a ''benefit corporation'' in a state, and being a ''certified benefit corporation'' also known as a B Corporation. B Corporations voluntarily promise to run their firm with social and environmental causes as a concern.<ref name=":3">The Alliance Center. “What Is the Difference between a Certified B Corporation and a Public Benefit Corporation (PBC)?” The Alliance Center Organization, www.thealliancecenter.org/wp-content/uploads/2019/11/Benefit-Corporation-101-Reduced.pdf.</ref> To receive their certification from B Lab they must score a minimum of 80 out of 200 on a survey called the B impact assessment.<ref name=":3" /> Next, they will have to pass through an audit process.<ref name=":3" /> Finally, the firms wishing to remain certified will be required to pay an annual fee to B Lab.<ref name=":3" /> Furthermore, companies will pledge to incorporate as a benefit corporation before their re-certification.<ref name=":3" />

== Taxation ==
A public benefit corporation is a legal entity that is organized and taxed as either an S corporation or C corporation.<ref name=":3" /> Founders will want to keep in mind that C-corporations experience a double tax associated with profits and again with dividends or payouts to shareholders.<ref name=":4">{{Cite web|title=S Corporations {{!}} Internal Revenue Service|url=https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations|access-date=2020-12-18|website=www.irs.gov|language=en}}</ref> S corporations are a legal entity that escapes this double taxation but there are certain stipulations that an entity will have to consider before being able to file as an S corporation.<ref name=":4" /> If you are currently an S or C corporation your company will not change its tax status when you transfer to a public benefit corporation.<ref name=":3" /> If you are currently an LLC, partnership or sole proprietorship then you will have to change tax status.<ref name=":3" /> While public benefit corporations are taxed the same as their underlying corporation status, there is added benefit to taxation on charitable contributions. If a firm makes donations to a qualifying non-profit the charitable contributions receive a tax deductible status. This will lower a firm's taxes compared to a typical C-corporation that is not donating money and only focusing on short term profits.

== Possible incentives to change to a benefit corporation ==
Reorganizing as a public benefit corporation affords a corporation's directors and founders protection from shareholder lawsuits when pursuing decisions that benefit the public at the expense of short-term profits.<ref name=":3" /> Furthermore, firms that transition typically experience advantages in retaining employees, increasing their customer loyalty and attracting prospective talent that will mesh well into the company culture.<ref name=":3" />

== Transition process ==
Changing status to a public benefit corporation requires several steps. First, the firm should choose one or more specific public benefit projects that it will pursue. Next, the articles of incorporation should be amended to state at the beginning that the firm is a public benefit corporation. The term public benefit corporation (PBC) or another abbreviation may be added to the entity's name if the founders choose. Finally the share certificates that are issued by the entity should state that the firm is a public benefit corporation. A shareholder vote is required to amend the articles which must include "non-voting" shares. The vote must gain a two-thirds majority to pass, depending on the Articles of Incorporation.<ref name=":3" /> Shareholders should be notified early that dissenter's rights apply. Dissenter's rights mean that those that vote against the amendment and qualify, may require the company to buy back their shares at fair value before the change.<ref name=":3" /> Firms making the transition should also perform a "due diligence review" of their business contracts, affairs and status in order to avoid any unforeseen liability associated with changing the form of the entity.<ref name=":3" />

The transition process is different state by state but for Colorado it is as follows. First, the firm must prepare the aforementioned amended articles. Then, they also amend their bylaws and assign responsibilities to the board of directors. Next, the amendments must be approved by the directors before going to a shareholder vote. Finally they file the amended articles of incorporation with the secretary of the state.<ref name=":3" />

If the prior entity is an LLC or partnership there is an extra step required. For these entities the articles of incorporation themselves and the related bylaws must first be prepared and filed with the state secretary. Only then will it be possible to merge or transition the previous form into the benefit corporation.<ref name=":3" />

== Investor and consumer preferences ==
According to ''William Mitchell Law Review'' journal, about 68 million US customers have a preference for making decisions about their purchases based on a sense of environmental or social responsibility.<ref name=":5">Babson, William H. Clark Jr. & Elizabeth K. "How Benefit Corporations Are Redefining the Purpose of Business Corporations." ''William Mitchell Law Review'' (2012): 818-842.</ref> Some individuals even go as far as using their purchases to "punish" companies for bad corporate behavior when it pertains to environmental or social cause.<ref name=":5" /> While others do the opposite, and use their purchasing power to reward firms that they believe are doing social or environmental good.<ref name=":5" /> The ''Mitchell Law Review'' also states that around 49% of Americans have at some point in time boycotted firms whose behavior they see as "not in the best interest of society."<ref name=":5" /> Recent research also suggests that when variables like price and quality are held constant, 87% of customers would switch from a less socially responsible brand to a more socially responsible competitor.<ref name=":5" />

== See also ==
<!-- Please keep entries in alphabetical order & add a short description WP:SEEALSO -->
{{div col|colwidth=30em|small=yes}}
* {{Annotated link |B Corporation (certification)|B corporation (certification)}}
* {{Annotated link |Community interest company}}
*{{Annotated link|Conscious business}}
*Examples of Delaware benefit corporations:
**{{Annotated link |Kickstarter}}
**{{Annotated link |Change.org}}
* {{Annotated link |Flexible purpose corporation}}
* {{Annotated link |Green America}}
* {{Annotated link |Impact investing}}
* {{Annotated link |Low-profit limited liability company}}
* {{Annotated link |Public-benefit nonprofit corporation}}
* {{Annotated link |Social purpose corporation}}
* {{Annotated link |Socially responsible investing}}
* {{Annotated link |Stakeholder theory}}
*{{Annotated link|Sustainable business}}
* {{Annotated link |Workplace spirituality}}
{{div col end}}
<!-- please keep entries in alphabetical order -->

==References==
{{Reflist}}

==External links==
* [http://www.socentlawtracker.org/#/bcorps Social Enterprise Law Tracker] – Interactive map visualizing the progression of benefit corporation legislation across the United States
* [http://www.benefitcorp.net BenefitCorp.net] {{Webarchive|url=https://web.archive.org/web/20200820043515/http://www.benefitcorp.net/ |date=August 20, 2020 }} – Information about creating and running benefit corporations 
* [https://legislature.vermont.gov/statutes/fullchapter/11a/021 Vermont benefit corporation statute] – an example of legislation
* [https://web.archive.org/web/20130130003520/http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=14001-15000&file=14600-14604 California benefit corporation statute]
{{Social accountability}}

[[Category:Public economics]]

{{Sourceattribution|Benefit corporation}}