Benefit Corporation Florida: Everything You Need to Know
A benefit corporation Florida is a business structure that is a relatively new option available to companies that benefit the public.3 min read
A benefit corporation Florida is a business structure that is a relatively new option available to companies that benefit the public. General public benefits in Florida are defined as "A material, positive effect on society and environment, as a whole, assessed by a third-party standard that is able to be attributed to the company and a benefit corporation's operations."
Background of Benefit Corporations
Many of today's entrepreneurs are more concerned with their business' social responsibility and purpose than simply the bottom line. Legislation passed in 2014 created two unique types of corporate structures that allow directors to put goals focusing on social awareness such as charitable causes or environmental issues over maximizing profits.
Corporations using a traditional structure can limit socially-conscious decisions in order to meet their fiduciary obligations. As a director of a benefit corporation, you are free to make decisions such as electing to use environmentally friendly supplies, contributing to social causes, or increasing employee wages as a priority over simply maximizing the return to shareholders.
In order to meet the Florida benefit corporation statutes, a company must meet the following guidelines:
- Incorporate to engage in public benefit activities.
- Weigh corporate decisions against the company's public benefit goals.
- Outline company activities that supported the public benefit goals of the company in their annual shareholders report.
Advantages of Florida Benefit Corporation
Entrepreneurs that select a benefit corporation structure want to ensure their environmental and social goals remain at the core of their business. There are many advantages to choosing this business structure, including:
- Improved Branding - A key advantage of being a benefit corporation is in marketing and branding, utilizing a marketing strategy that focuses on your social conscious status. Examples of businesses that have effectively used this strategy include Ben & Jerry's, Patagonia, and Etsy.
- Limited Legal Liability - When you register a company as a benefit corporation, it allows you the same limited legal liability level as an S corporation, LLC, or C corporation.
- Improved Reputation - Benefit corporations are often viewed as more ethical due to their commitment to social responsibility and protection of the environment. You may be seen as an innovative business and leader in your industry, both of which can assist in attracting customers and investors.
- Attract Qualified Employees - With millennials soon making up the majority of the U.S. workforce, social and environmental issues will become more important. This group of workers looks for businesses that focus on sustainability and contributing to the good of the public when seeking employment.
- High Employee Morale - Employees want to be part of a business that is committed to finding solutions to environmental and social issues. This leads to higher productivity in the workplace and a decrease in the number of employees who leave their positions.
- Shareholders Like Innovative Entrepreneurs - Investors want to invest in businesses created by entrepreneurs like Steve Jobs and Elon Musk who are forward-thinking. Businesses that focus on improving environmental and social issues and can still produce a profit will many times be the recipient of additional goodwill.
Disadvantages of Florida Benefit Corporation
- Tax Classification - B Corp is not considered a tax classification and has no federal or state tax benefit. Operating as an LLC instead of a B Corp allows you to maintain tax efficiency and flexibility.
- Investor Uncertainty - With issues such as derivative lawsuit claims, enforceability of investor protections, fiduciary obligations of B Corp directors, and other such issues being reviewed by Florida courts, investors such as venture capitalists may be hesitant to sign on.
- Later Conversion - Choosing to wait to become a benefit corporation allows you to maintain the structural flexibility of your business. You can also decide to have your company be overseen by B Corp provisions at a later date if you have investors interested in that option.
- D & O Insurance Issues - While benefit corporation statutes clearly show that directors are not to be held liable for focusing on social benefits outlined by the company over simply maximizing profits, insurers will look to the directors as having obligations similar to those as their nonprofit and for-profit counterparts.
If you have questions regarding a benefit corporation Florida business status, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.