Benefit Corporation

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September 24, 2014/in Social Enterprise /by Ryan Shaening Pokrasso

"Benefit Corporations and Social Purpose Corporations are entity types that were established in California with an eye towards allowing for-profit companies to engage in socially-minded activities traditionally carried out by non-profit organizations. Such activities are typically frowned upon by traditional corporation shareholders and the law.

It should be noted that neither Benefit Corporations nor Social Purpose Corporations get special tax treatment in a way that non-profit organizations do. But both corporate types are structured as for-profit entities that can be used by for-profit entrepreneurs who consider themselves for-impact as well—that is, they want to have a social and environmental impact. But there are significant differences between the two that should be considered by entrepreneurs looking to stay in the for-profit realm while using their business to make a difference in the community and the environment.This article focuses on the differences between California Benefit Corporations and Social Purpose Corporations (which only exist in California).

A Benefit Corporation is required to be formed for the purpose of creating general public benefit. This means that a Benefit Corporation must operate as a triple-bottom line business by considering its impact on the community and the environment, taken as a whole, along with generating profits for its shareholders. A Benefit Corporation is not allowed to give priority to any of the following factors when making decisions, unless it has stated otherwise in its Articles of Incorporation.

Benefit Corporations may be sued by shareholders, directors, the corporation itself, or owners of a parent corporation in a “benefit proceeding” to determine whether the corporation is adequately pursuing its benefit purpose.


"If you plan to establish a flexible purpose corporation, then California (Edit: and now Washington) is your only choice. But if you set your sights on creating a benefit corporation, then you can choose from a number of states.)"

Benefit Corporation statutes have been passed in 27 states across the country, and they have been introduced in 13 other states and territories. For example, Delaware signed into law its Benefit Corporation act in July 2013. Please note that the specific details of each state’s requirements may differ. For more information, click here.

See Also

Social Purpose Corporation Co-op