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Benefit Corporations: Corporate Conscience is No Longer an Oxymoron

Benefit Corporation Defined

A Benefit Corporation is a type of for-profit corporate entity that it includes a positive impact statement in its legally defined goals. The positive impact statement of a Benefit Corporation specifically defines “the best interest of the corporation” as not only including profits, but also having a positive impact on society, workers, the community, and the environment.


Benefit Corporations differ from traditional corporations in that traditional corporations generally view profits as being the main factor in determining what is in the best interest of the corporation.


The directors and officers of a Benefit Corporation operate the business with the same authority as in a traditional corporation, but they are required to consider the impact of their decisions not only on shareholders, but also on employees, customers, the community, and the local and global environment. A Benefit corporation must pursue the “general public benefit” in addition to its main purpose.


Why become a Benefit Corporation

There are many reasons for a corporation to organize as a Benefit Corporation. A Benefit Corporation allows the owner(s) of the corporation to put their values on the forefront, to organize a company with a social conscience. As consumers grow more socially conscious Benefit Corporations allow consumers to feel that by doing business with your company, they are supporting a business that aligns with their personal standards and values.


Furthermore, Benefit Corporation legislation ensures that a director is required to consider other public benefits in addition to profit, thereby preventing shareholders from using a decrease in stock value as evidence for dismissal or a lawsuit against the corporation.

Transparency provisions are a main requirement of Benefit Corporations, and many states require Benefit Corporations to publish an annual benefit report that includes assessing its overall social and environmental performance against a third-party standard.


As discussed in the article “Benefit Corporation Third-Party Standards”, there are approximately 12 third-party standards that satisfy the reporting requirements of most benefit corporation statutes. A benefit corporation does not need to be certified or audited by these third-parties, but instead may use the third-party standards as a standard by which it measures its performance.


How to become a Benefit Corporation

A Benefit Corporation is formed in the same way a traditional corporation is formed, with the exception that the Articles of Incorporation of a Benefit Corporation must state that “this corporation is a benefit corporation.”


A C corporation may change to a Benefit Corporation by merely amending its Bylaws to state that it is a Benefit Corporation. The amendment must be approved by the “minimum status vote” – at least two-thirds of the votes of outstanding shares of each class or series, or greater vote if required in the Articles of Incorporation or bylaws. Shareholders that do not wish the corporation to convert to a Benefit Corporation may exercise dissenters’ rights. When a shareholder exercises dissenters’ rights, the corporation is required to purchase, at fair market value, the shares owned by the dissenting shareholders.


35 states and Washington, D.C. recognize Benefit Corporations, including California. The specific requirements for a California Benefit Corporation are discussed in the article, California Benefit Corporations.

O’Neill Tran Law assumes no responsibility for the accuracy or timeliness of the information on this website.  This website is for informational purposes only and is not legal advice nor a substitute for legal counsel.  The use of this website does not create an attorney-client relationship.

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