Nevada Benefit Corporation: Everything You Need to Know
A Nevada benefit corporation creates a benefit to the general public and positive impact on the environment.3 min read
2. Requirements to Become a B Corporation
3. Benefit Corp vs. Certified B Corp
4. Benefit Corporations: A Marriage of Opportunity and Community
Also known as B corporations, benefit corporations involve for-profit organizations that use several key factors when evaluating their decision and strategy making processes. They use society, the environment, and profitability to determine what works best. They also let the for-profit company subordinate its fiduciary duty in order to turn a profit.
Benefit corporations also allow higher management to evaluate other areas instead of relying on the interests of shareholders. The corporations look at how the community, employees, and environment have an effect on their decisions. Benefit corporations create a positive impact on society and the environment.
Nevada passed Assembly Bill 89 in May 2013 to authorize benefit corporation filings, and the following January, the Nevada secretary of state accepted filings for benefit corporations. These corporations must specify one or more public benefits as an extra purpose.
Also, in Nevada, companies can become benefit corporations when they create a general public benefit. Typically a third-party evaluates certain requirements.
Articles of Incorporation, which corporations fill out to form B corporations, identify the specific public benefits, such as promoting science, preserving the environment, or giving the underserved certain products. Existing corporations can become benefit corporations if they fill out amended articles with the secretary of state and then pay the filing fee.
In addition, all B corps must provide benefit reports and standard annual reporting. All shareholders and the secretary of state must receive these reports via online resources. Directors and officers must consider the impact their decisions have on employees, customers, stakeholders, the environment, and the community.
Requirements to Become a B Corporation
To become benefit corporations, companies must have several key features:
- They should have a purpose and strive to create a positive impact on society and the environment. Corporations should also contribute to specific purposes that benefit the public.
- They should have accountability, where higher level management, such as directors and officers, think about the impact of their decisions on others. These individuals include stakeholders, employees, and customers.
- They should have an independent benefit director that provides a statement in the yearly benefit report. This report declares if the corporation created a specific or general public benefit.
- They should have transparency, which means they should publish a public report that evaluates their social and environmental performance against a third-party standard. This report should remain available online via a company website.
Benefit Corp vs. Certified B Corp
For benefit and certified B corporations, directors must take into account the decisions they have and how they affect shareholders, stakeholders, the community, the environment, and employees. Both types of corporations must publish a public report that measures their social and environmental performance.
To qualify as certified benefit corporations, the business must achieve a specific minimum score on the B impact assessment. However, the benefit corporation must publish a public report that determines their social and environmental performance against a third-party standard, but the report doesn't need verification or certification.
Both benefit and certified benefit corporations came about from a nonprofit called B Lab. Certified B corporations must have support from B Lab for a variety of services, such as sales, marketing, business strategies, and saving money.
The District of Columbia along with 20 states recognize the corporate status of B corporations, while certified B corporations have recognition in all 50 U.S. states and around the world.
Benefit Corporations: A Marriage of Opportunity and Community
Benefit corporations are a combination of for-profit and nonprofit concepts. They are for-profit entities, which means they issue shares, pay shareholders dividends, and seek financial gains. Nonprofits do not have these entities.
Benefit corporations also serve benefits to the general public, which include protecting the environment, helping low-income people, and promoting health.
Savvy investors can use benefit corporations to push charitable agendas since the companies cannot stray from their vision once they establish the articles of the corporation. Assembly Bill 89 lets some shareholders bring forth a benefit enforcement proceeding, which seeks relief. A successful proceeding typically results in attorney fees and injunctive relief.
In Nevada, nonprofit corporations cannot convert to a benefit corporation, but professional corporations can. For-profit Nevada corporations can turn into a benefit corporation, but shareholders who do not wish to join have dissenters' rights. This means they can have their shares bought out at a fair value.
If you need help with a Nevada benefit corporation, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top five 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.