Benefit Corporations

What they are

Why they matter

How they are formed

How are they treated

A legal alternative for socially conscious companies to legally declare and implement those ideals that represent a material positive impact on society and the environment.

Maximize Shared

Values

Maximize ShareholderValue

Benefit Corporations

20th Century

21st Century

Also known as:

Benefit Corporations – general public benefitFlexible Purpose Corporations – a single purposeMaryland Benefit LLC – essentially the same as their benefit corporation legislation (but allows for existing Maryland LLC’s to convert without having to convert over to a corporation first)L2C’s – low profit LLC’s with a charitable or educational purpose (some interesting things going on with these entities with the IRS

looking to treat these entities as eligible to receive Foundation grants)

Benefit Corporations

Some of the key differences between a benefit corporation versus a traditional corporation:

Traditional corporations:• State Supreme Courts have long ruled that “a business

corporation is organized and carried on primarily for the profit of the stockholders”.

• Board of director fiduciary duties to its shareholders lie in a duty of loyalty and duty of care.

• Directors are held liable for corporate day-to-day decisions. A “business judgment rule” is applied to ensure that actions take into consideration shareholder value.

Benefit Corporations

Some of the key differences between a benefit corporation versus a traditional corporation:

Benefit corporations:• Board of directors are required to consider the effects of

decisions on all stakeholders.• Responsible to measure its effectiveness (against a third

party standard*) of making a positive impact on society by publishing a public report

*11 different standard setters, however gov’t does not influence standards; not required to adopt a single standard, standards not required to be audited

Benefit Corporations

1,100+ B Corporations in 120 Industries in 40 Countries

Currently there are 27 states with benefit corporation legislation on the books

Benefit Corporations

Benefit corporations are formed just like traditional corporations according to the state specific legislative requirements. For Pennsylvania, those requirement include the following:

File Articles of Incorporation prescribed by state law.• Purpose

• Declare commitment to creating general public benefit• Supermajority vote of shareholders (67%+)• Assess itself against a third party standard

• Accountability – requires directors to consider society and environment in addition to profit. Provides shareholders with a right of action to function with new purpose.

• Transparency – produce an annual Benefit Report (similar in form to the filing of articles of incorporation) assessed against a third party standard

Benefit Corporations

Benefit corporations treated just like traditional corporations (C-Corp or S-Corp).

There is no distinction in the eyes of the IRS or state departments of revenue.

Benefit Corporations

Certified B Corporations

Certified B Corporations – certified by non-profit B Lab

Simlar to LEED certification for green buidlingFair Trade certification for coffee and chocolateUSDA Organic for milk products

Certified B Corporations v. Benefit Corporations Comparisons

I am inspired by Greyston Bakery

Yonkers, New York

Hires & trains previously incarcerated individuals

Why B Corps Matter

B Corps

• Accelerate the evolution of capitalism• Redefine success in business• Concrete and measurable• Build collective voice• Better businesses• Help us live to a higher purpose• Stand for something, not against anything

Redefine success in business

Redefine success in business

Bart Houlahan https://www.youtube.com/watch?v=Hayf9Ob9fiQ

bimpactassessment.net / quick

Thank you!

scott@kregel-cpa.com@scottkregelcpa(c) 215-783-9590