how to form a benefit corporation

How to Form a Benefit Corporation.

• Select a business name.
• Form a board of directors.
• File articles of incorporation (also known as a certificate of formation) with the state and pay a filing fee. Your formation documents must specify ...
• Draft bylaws.
• Apply for business licenses.
• Register with tax agencies.

Full Answer

What is a benefit corporation and why form one?

Furthering the public good: The main reason to form a benefit corporation is to further a public benefit that is meaningful to you and to help ensure that your mission lives on after you and other owners leave the corporation.

Where can I start a benefit corporation?

Other states like Alabama, Connecticut, Florida, Iowa, Montana, North Carolina, Texas and West Virginia have introduced benefit corporation legislation. Start a Benefit Corporation for $99+ state fees Make a positive impact with your business. Get Started Now

What are the requirements for a benefit corporation?

To qualify as a benefit corporation, your company must have a public benefit purpose and commit to creating annual reports that show your progress towards your stated mission. Your formation documents must include a statement of one or more public benefit purposes, such as: a general public benefit purpose (such as a positive impact on society).

Can you convert a for-profit corporation to a benefit corporation?

If the benefit corporation entity is available, you can form a new benefit corporation from scratch; and if you already have a for-profit corporation, you can convert it with the approval of your shareholders. In many ways, benefit corporations are similar to for-profit corporations.

How do you create a public benefit corporation?

To register as a benefit corporation, you must file the Articles of Incorporation with the Secretary of State, along with the prescribed filing fees. As of now, you can form a benefit corporation in 27 states. However, more states are likely to enact the statute for benefit corporations in the coming years.

Can a small business be a benefit corporation?

Your business can apply for B Corp certification whether it's organized as a partnership, a limited liability company (LLC), or incorporated as a traditional C corporation.

What is an example of a benefit corporation?

Some examples of government-provided public benefit corporations include transit systems, public libraries, and hospitals.

What is the primary purpose of a benefit corporation?

A benefit corporation still has a profit-making goal, but it also has a broader public benefit purpose: to make a material positive impact on society and the environment.

How is a benefit corporation different from a nonprofit?

In a nonprofit, there are no owners or shareholders, while a B corp has shareholders. While a nonprofit works toward a public good without the intent of turning a profit, a B corp is a traditional company in that shareholders expect a return.

What is the difference between AB Corp and a benefit corporation?

These terms are often used interchangeably, without taking their remarkable differences into consideration. While the term "B Corp" refers to a third-party certification, "Benefit Corporation" refers to an actual legal business structure.

Who owns a benefit corporation?

The shareholders of a benefit corporation actually own the company as well as its assets. There are other significant differences between the two entities.

What is a benefit corporation structure?

A benefit corporation is a legal tool to create a solid foundation for long term mission alignment and value creation. It protects company missions through capital raises and leadership changes. Benefit corporation structure creates more flexibility when evaluating potential sale and liquidity options.

What are the pros and cons of a benefit corporation?

B-Corp Pros and ConsYou might have an edge when it comes to hiring talent. ... You'll earn extra publicity. ... Getting accepted is hard. ... There are no additional tax benefits from being a B Corp as opposed to more traditional corporations like an S Corp or an LLC. ... It's not available in every state.

What states allow benefit corporations?

Benefit corporation legislation has been introduced in the following states:Wisconsin.Texas.Ohio.North Carolina.New Mexico.Montana.Michigan.Kentucky.More items...

Are public benefit corporations for-profit?

Public Benefit Corporations or “PBCs” are a type of for-profit corporate entity currently authorized by 35 states and the District of Columbia, similar to a C-corp, S-corp, or LLC.

Why would a company become a public benefit corporation?

Accountability and Transparency. Due to factors such as its public benefit purpose and legislated reporting requirements, a PBC provides the socially conscious investor or consumer with an enhanced level of accountability and transparency, which often adds to its overall appeal.

What is the purpose of a benefit corporation?

The mission of a benefit corporation is to create a general public benefit in addition to shareholder value.

What are the advantages of being a B Corp?

Another advantage of becoming a B Corp is that you can pay people whatever salary you wish, allowing you to attract top talent. It's more than just your stakeholders understanding that there is a social component to the business; a B Corp is legally required to pursue that social mission, Gilbert says.

Why is B Corp important?

The big advantage of a B Corp over a nonprofit organization is the for-profit structure. As a for-profit benefit company you can attract outside investors that a non-profit organization cannot.

Why do social entrepreneurs need a B corp?

For social entrepreneurs, a B Corp was created to help them specifically meet their needs , which is to scale their really good idea. But when they scale, they don't also want to lose control of their social mission, explains Gilbert. "Becoming a for-profit corporation helps them scale.

How is a benefit corporation formed?

A benefit corporation is formed just like a traditional for-profit corporation by filing articles of incorporation with the appropriate state agency. However, benefit corporation articles of incorporation will include a statement of its social or environmental purpose.

How to convert an existing corporation to a benefit corporation?

Converting an existing corporation to a benefit corporation will typically involve filing amended articles of incorporation that add a beneficial purpose statement. This may require a two-thirds super-majority vote of shareholders. The fee for filing amended documents varies from state to state.

What is the difference between a benefit corporation and a nonprofit corporation?

A benefit corporation has two main advantages over creating a nonprofit corporation: The benefit corporation is much simpler to establish and can profit. It is a rather complex process to secure and maintain the tax-exempt status of a nonprofit.

What is the sole duty of a for profit corporation?

A traditional for-profit corporation's sole duty is to maximize profits for shareholders. Taking action to promote a social or environmental cause that does not serve profits could be considered a violation of this duty, subjecting the officers and directors to lawsuits by shareholders. A benefit corporation, which still operates for profit, ...

How many states allow benefit corporations?

If you wish to promote a social or environmental benefit as part of your company's purpose, consider creating a benefit corporation. More than 30 states, and the District of Columbia, allow benefit corporations. Additional states will likely be enacting benefit corporation laws in the future. To determine if your state allows benefit corporations, ...

What is the purpose of a stated beneficial purpose?

As stated above, the addition of a stated beneficial purpose allows managers to further that purpose without being subject to shareholder lawsuits for violating the duty to pursue profits. Attracting certain investors.

Why is it important for directors to sell a company?

With the sale of a traditional for-profit corporation, it is generally considered the duty of directors to obtain the highest price to maximize shareholders' financial interests .

Overview

Article 17 of the Business Corporation Law (“BCL”) governs the incorporation and operation of benefit corporations.

How to File

Complete and file the Certificate of Incorporation with the Department of State.

Name Availability

The Division of Corporations is required by statute to reject for use any corporate, limited partnership, or limited liability company name that is not "distinguishable" from existing names on file.

Fees

To pay for a fee using your credit card or debit card, complete and sign the Credit Card/Debit Card Authorization Form and submit it to the Division of Corporations with your request for service.

Expedited Processing

Expedited Handling Services: (optional) The NYS Department of State's Division of Corporations offers expedited processing of time-sensitive documents.

Election of an Existing Business Corporation to become a Benefit Corporation

An existing business corporation may elect to become a benefit corporation by amending its certificate of incorporation to include a statement that “The corporation is a benefit corporation under Article 17 of the Business Corporation Law.” The certificate of amendment must be authorized by the “minimum status vote” of the shareholders (BCL §§1702 (d) and 1704)..

Termination of Benefit Corporation Status

An existing benefit corporation may terminate its status as a benefit corporation by amending its certificate of incorporation to delete the statement that “The corporation is a benefit corporation under Article 17 of Business Corporation Law.” The certificate of amendment must be authorized by the “minimum status vote” of the shareholders (BCL §§1702 (d) and 1704)..

What is the purpose of a benefit corporation?

A benefit corporation is a business entity with a dual purpose: making a profit and promoting the public good. While a for-profit corporation's sole purpose is to make a profit for its shareholders, and a nonprofit's purpose is to fulfill its mission or support its beneficiaries (such as promoting environmental sustainability or serving low-income ...

What is a B corporation?

Many benefit corporations refer to themselves as "B" corporations in their marketing materials. A B corporation has applied to a nongovernmental, nonprofit business (called B Lab) for the right to use that phrase in its marketing materials. To obtain certification, the business pays membership dues and must pass an impact assessment, which scores the organization on environmental sustainability, community impact, and transparency. Certified "B" corporations get access to corporate discounts and may be included in B Lab's marketing campaigns. The "B" designation is more or less like the Good Housekeeping Seal of Approval.

Do benefit corporations report to shareholders?

Directors of benefit corporations must report to their shareholders (and in some states to the public) on how they are fulfilling their public benefit purpose. Benefit Corporations and "B" Corporations. Many benefit corporations refer to themselves as "B" corporations in their marketing materials.

Can a nonprofit corporation distribute profits?

By contrast, if you form a nonprofit corporation, you cannot distribute profits to the owners (apart from reasonable salaries). Attracting customers and employees: Benefit corporations can attract devoted customers and employees, who are drawn to the corporation's mission.

Is a benefit corporation a good choice?

A benefit corporation is not the best choice for every business. Some of the disadvantages you should consider include: Not available in every state: Not every state recognizes benefit corporations. If you cannot form a benefit corporation in your home state, you can explore out-of-state registration. Consult with an attorney to determine ...

Is a benefit corporation a for profit corporation?

In many ways, benefit corporations are similar to for-profit corporations. In both, the shareholders are the owners and the board of directors oversee the direction of the business. Both entities pay corporate income tax and file the same annual tax returns. As discussed below, the process for forming a benefit corporation is similar to a for-profit corporation.

Why is a benefit corporation important?

The benefit corporation was created to provide an option for entrepreneurs who want to voluntarily adopt higher standards of corporate purpose, transparency, and accountability. The entity provides a way to legally cement a social or environmental mission into a company's corporate and legal structure.

What is a B corp?

The B-Corporation is an actual legal entity recognized by the Secretary of State and formed upon the filing of required paperwork, like the Articles of Incorporation. Conversely, the B Corp is a certification, conferred upon a company that meets certain social and environmental sustainability standards.

What are the different types of business entities?

When you decide to incorporate your business, there are four different business entities to choose from: C-Corporation, S-Corporation, Non-Profit Corporation, or Professional Corporation . Read more or compare business entities in our Comparison Chart.

Can a B corp be a B corporation?

Therefore, it is possible to be a B Corp but not a legally recognized B-Corporation, thus allowing other business forms like LLCs or professional corporations to voluntarily commit themselves to the purpose, transparency and accountability requirements, inherent in B-Corporations. We'll help you file your business.

Which state was the first to pass benefit corporation legislation?

Maryland was the first state to pass benefit corporation legislation in April 2010, followed by Hawaii, Virginia, California, Vermont, and New Jersey. In December, 2011, New York became the 7th state, and in June, 2012, Washington became the 8th.

Can a nonprofit become a benefit corporation?

Nonprofits cannot become benefit corporations themselves, but a nonprofit may create a benefit corporation as a vehicle for conducting and scaling the earned-income activities of the nonprofit.

Is a B corp a legal entity?

Therefore, it is possible to be a B Corp but not a legally recognized B-Corporation, thus allowing other business forms like LLCs or professional corporations to voluntarily commit themselves to the purpose, transparency and accountability requirements, inherent in B-Corporations.

What is Delaware public benefit corporation?

A Delaware public benefit corporation is a for-profit corporation, organized with a specified public benefit purpose in its Certificate of Incorporation. It is structured like a typical corporation with shareholders, directors and officers.

Why are directors of public benefit corporations afforded protections?

Instead of prioritizing the financial interests of investors, directors of public benefit corporations are afforded protections enabling them to advance the stated public benefit purpose without risk of allegations of waste by shareholders. These protections provide flexibility, allowing a corporation to be managed in a manner ...

How many consumers are aware of the public benefit corporation campaign?

A survey showed that 96% of consumers who were made aware of the public benefit corporation campaign said that they would begin to look for products made by public benefit corporations while shopping. It is apparent that companies will need to be sustainable in order to remain competitive in the marketplace. Fill out a simple online form.

Is Delaware a C corporation?

Filing as a Delaware public benefit corporation does not carry any specific tax advantages. A public benefit corporation is taxed as a C-Corporation, unless it elects to be taxed as an S-Corporation, which generally means the company does not pay income taxes.