Benefit corporations recognized by new state laws (see our Benefit Corporation Legislative Status Map and Chart for details about each state's passed or proposed legislation) offer some exciting new opportunities for existing businesses and new businesses, which traditional business structures do not offer. Consider the following benefits to your company when deciding if a benefit corporation is right for you.
The primary benefits of choosing a legislatively recognized, for-profit benefit corporation over a non-profit model are that benefit corporations have shareholders, can raise capital more freely, and can distribute profits. Tax-exempt nonprofits have obvious tax advantages and can earn profits, but they cannot distribute the profits, as there are no shareholders. A benefit corporation can also pursue for-profit business goals at the same time that it pursues its identified social missions or public benefits.
The primary benefits of choosing a benefit corporation over a traditional for-profit model are (1) protecting the company from shareholder suits complaining that the company's management is focusing on considerations other than maximizing profits, and (2) weaving the company's social mission into the corporation's formative documents, so that the mission cannot be eviscerated by a hostile takeover without a supermajority vote of shareholders. Financially, there can be other advantages. For example, some jurisdictions offer tax breaks and bidding preferences to benefit corporations. Private certification as a benefit corporation also has advantages. B Lab®, for example, offers its privately certified members significant cost savings and access to expertise. (See http://www.bcorporation.net/become-a-b-corp/why-become-a-b-corp/save-money-and-access-services).
Once you decide that a benefit corporation may be the right model for your company, consider consulting with a lawyer to fully evaluate the benefits and risks of becoming a "B Corp." Our firm, Smith Moore Leatherwood, has formed a "Benefit Corporation Team" to assist aspiring and existing benefit corporations.
©2014. Smith Moore Leatherwood LLP. All rights reserved.