Benefit Corporations

Benefit Corporations

What they areWhy they matterHow they are formedHow are they treated

1A 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 SharedValuesMaximize ShareholderValue

Benefit Corporations20th Century21st Century2Also 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 LLCs to convert without having to convert over to a corporation first)L2Cs low profit LLCs 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 Corporations3Some 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 Corporations4Some 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 govt does not influence standards; not required to adopt a single standard, standards not required to be auditedBenefit Corporations51,100+ B Corporations in 120 Industries in 40 Countries

6Currently there are 27 states with benefit corporation legislation on the books

Benefit Corporations

7Benefit 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.PurposeDeclare commitment to creating general public benefitSupermajority vote of shareholders (67%+)Assess itself against a third party standardAccountability 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 standardBenefit Corporations8Benefit 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 Corporations9Certified B CorporationsCertified B Corporations certified by non-profit B Lab

Similar to LEED certification for green buildingFair Trade certification for coffee and chocolateUSDA Organic for milk products

10Certified B Corporations v. Benefit Corporations Comparisons

11I am inspired by Greyston BakeryYonkers, New YorkHires & trains previously incarcerated individuals

12Why B Corps MatterB CorpsAccelerate the evolution of capitalismRedefine success in businessConcrete and measurableBuild collective voiceBetter businessesHelp us live to a higher purposeStand for something, not against anything

13Redefine success in business

14Redefine success in business

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

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23bimpactassessment.net / quick

24Thank you!

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

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