What Is Public Benefit Corporation Colorado?
A public benefit corporation Colorado is a type of business entity that seeks to improve society and environment in addition to gaining profits.3 min read
A public benefit corporation Colorado is a type of business entity formed in the state of Colorado that seeks to improve society and environment in addition to gaining profits.
Benefit Corporation Law
If a business owner is considering incorporating as a benefit corporation, also called a B corp, or switching their current business over to this type, they must first understand the requirements involved. Public benefit corporations are not the right fit for every business. This business structure was created to allow companies to find that perfect balance of the fiduciary duties between their stakeholders and shareholders and to carefully consider the effect their business has on the community.
Washington D.C. and 19 states currently recognize benefit corporation law. Some of the advantages of forming a benefit corporation include:
- Facilitating the growth of businesses
- Giving business owners more opportunities to expand
- Encouraging awareness of the social impact inherent in economic growth
- Attracting like-minded investors
What Is a Benefit Corporation?
There are three essential parts of a benefit corporation. A business must comply with these three aspects if they want to be classified as a public benefit corporation:
The goal or purpose of a benefit corporation must be different from that of a standard corporation. Corporations are usually formed simply to turn a profit, but benefit corporations add more layers to that goal. They will take societal and environmental effects into consideration along with profit maximizing.
When forming a benefit corporation, the business owners are required to declare their company's commitment to the benefit of the general public. They may even be required to declare exactly what specific benefits their business offers.
In order for a company to transition to a benefit corporation, they must have a majority two-thirds vote among all of the shareholders. This helps to ensure that most everyone is on the same page. It's also a good idea to amend the company's articles of incorporation to specify this change.
A third-party standard must be used to assess whether the public benefit corporation is, in fact, benefiting the public. This is called the B impact assessment.
A corporation is required to show a material positive impact that can be clearly seen. This requires the board of directors to always keep their community and environment in mind when making company decisions. Standard corporations also have accountability when it comes to their company structure, reporting, and other, but benefit corporations have an added element.
As a part of this accountability requirement, there is a level of transparency that must be maintained throughout the life of a public benefit corporation. Annual benefit reports are required and must be assessed through comparison with a third-party standard and must be filed with the state in some cases. The benefit corporation law outlines what should be considered when assessing the benefits of a particular company.
These annual benefit reports must also be shared with the public and made available to all of the corporation's shareholders.
How to Incorporate as a Public Benefit Corporation
The exact steps for incorporating or transitioning to a public benefit corporation vary depending on the state, but there are a few things to keep in mind no matter where the business is located.
First and foremost, the best place to find information on how to form a benefit corporation is by contacting a business formation lawyer.
Before a business owner decides to incorporate as a benefit corporation, they should ask themselves two questions:
- Is this a newly formed a business?
- Is this an established business hoping to change their structure?
If the answer to the second question is yes, then the main necessary step will be amending the company's articles of incorporation and possibly the operating agreement.
If this is a newly formed business, the steps to take in order to incorporate as a public benefit corporation are almost exactly the same as the steps to incorporate as a basic C corporation. The Secretary of State's (SOS) website is the best place to find instructions regarding this process in the state in which a business owner plans to conduct business. Some Secretary of State's offices have a business division that handles business formation.
If you need help with a public benefit corporation in Colorado, 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, Stripe, and Twilio.