What is a Benefit Corporation?

Benefit corporations are a new legal tool to create a solid foundation for long term mission alignment and value creation. It protects mission through capital raises and leadership changes, creates more flexibility when evaluating potential sale and liquidity options, and prepares businesses to lead a mission-driven life post-IPO.

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Benefit Corporations are Necessary

Not sure if the benefit corporation option is necessary? Here are three reasons why.

Legal Precedent

Traditional corporate law requires that directors place profit above all else.

Mission Loss

During the time of sale or a liquidity scenario, a new shareholder, investor or owner could force a businesses to abandon its mission.

Inadequate Alternatives

Constituency statutes do not commit corporations to sustainability and the Business Judgement Rule does not provide an exception to the rule of shareholder primacy.

 

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The Model Legislation

The benefit corporation Model Legislation was drafted by Bill Clark from Drinker, Biddle, & Reath LLP and has evolved based on input from state legislatures, state bar associations, Secretaries of State offices, Attorneys General offices, associations, nonprofit groups and businesses in the states in which the legislation has been passed or introduced. Learn more about why B Lab recommends using the model legislation.

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Common Misconceptions

Misconception: Benefit corporations are non-profits or hybrid entities.
Misconception: The Constituency Statute is sufficient.
Misconception: Benefit corporations get special tax treatment
Misconception: The benefit corporation structure is unnecessary

Testimonials

"This legislation will facilitate greater legal and market recognition for businesses that do well while doing good – a value my firm has long exemplified and something we should all support."

Donald Simon, Wendel Rosen Black & Dean

"The creation of the benefit corporation structure is the first step towards transforming the global economic system so that all companies start to think and act in a responsible manner. Pennsylvania is helping to lead the way towards a more just and sustainable global economy."

Bill Clark, Drinker Biddle & Reath

"A benefit corporation gives the (company) directors the ability to pursue public benefits without looking over their shoulders and wondering if they're going to get sued by shareholders."

Herrick Lidstone, Colorado Bar Association

Legal Articles on Benefit Corporations

Learn more about the background, justification, and implementation of benefit corporations with our directory of legal articles.

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State by State Analysis

While the core tenets of the benefit corporation structure of purpose, accountability, and transparency are included in all the states' statutes, there are some differences. Most of these differences stem from differences in the state corporate codes (e.g. the inclusion of dissenter's rights), and some reflect a difference of opinion on how best to implement the new structure (e.g. the requirement to have a specific benefit director).

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