Benefit Corporation Examples: Everything You Need to Know
Benefit corporation includes many well-known corporations such as Kickstarter, Patagonia, King Arthur Flour, and Method but what exactly is it?3 min read
Benefit corporation examples include many well-known corporations, such as Kickstarter, Patagonia, King Arthur Flour, and Method. So what exactly is a benefit corporation? It's well-known that consumers today are concerned about social, ethical, and environmental issues, which can greatly influence their decisions about what products to purchase. A 2014 study conducted by Nielsen found that over half of global online consumers would pay more for services and products made by companies with commitments to beneficial social and environmental causes. This is great news for corporations that focus on such causes!
Benefit corporations are still for-profit entities, which, naturally, remain focused on their financial returns. However, their scope of focus also includes taking action and making decisions that result in positive changes in the world. These businesses acknowledge their obligation to their stakeholders, but also to their environment and community, which they can legally pronounce as their objective. Today, many companies express their desire to "do good" in their business operations.
Businesses often provide public pages on their websites or post in social media avenues about their actions for positive change and the ways in which their business provides community services and sustainable production methods. Some companies even provide on-site daycare, yoga and fitness facilities, and numerous other benefits to their employees.
The benefit corporation movement began in the United States in 2007 by 81 companies that sought an alternative to the exclusively profit-driven way of conducting business. Since the first benefit corporation law was passed in Maryland in 2010, many different kinds of companies have become benefit corporations.
Benefit corporations currently operate in a variety of different industries, such as manufacturing, service, private education, retail, and food and beverage production. A benefit corporation can be any size, whether that's a small one-person service, or a large-scale multinational brand with a high number of employees. In both the public and private markets, benefit corporations have been able to increase capital.
Becoming a Benefit Corporation
There are numerous advantages to benefit corporation status, which apply to all participants, from consumers to shareholders and directors. In particular, directors can benefit from decreased directory liability when confronted with decisions that relate to nonfinancial stakeholders, and shareholders are able to hold the company accountable to its objective. All parties benefit from the precedents and protections contained within corporate law. Directors and shareholders can protect their mission via leadership changes, capital raises, and flexible potential sale and liquidity options.
The first step to becoming a legally recognized benefit corporation is to make sure your state recognizes it as a legal and valid business structure. As of January 22, 2016, 30 state legislatures and the District of Columbia acknowledge a legal status for benefit corporations. This number appears to be increasing annually. Interested business owners are recommended to look into their state's laws. If benefit corporation status is not legally recognized there, incorporating in a nearby state could be a viable option.
Should your company choose to become a benefit corporation, your tax status will not change. It will maintain its status as an S corporation or C corporation even while being recognized as a benefit corporation. A corporation that wishes to express further commitment to positive social and environmental changes can apply to become a Certified B Corporation (or B Corp). This requires an extensive assessment by B Lab, which utilized a rigorous survey in order to rate a corporation's employee relations, environmental practices, local community activism, and other factors.
In a 2011 Business News Daily interview, David Murphy, former CEO of Better World Books, explained that the certification is like a Good Housekeeping seal of approval. "If your company is a Certified B Corporation, that really says something. You're there to serve all those stakeholders, and you're willing to prove it." Once a business has been certified by B Lab, it will be audited on occasion to make sure it is keeping up its positive practices.
Except in the state of Delaware, benefit corporations must make an annual benefit report available to the public. This report determines their general social and environmental performance as compared to a third party standard. The report uses the third party standard as an evaluation tool, but need not be certified or audited by a third party.
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