Transactional Attorneys Assisting with Benefit Corporations Throughout San Bernardino

n an effort to promote various social benefits and public goods in addition to shareholder profits, California recently passed legislation allowing corporations to apply for benefit corporation status. This status is of increasing interest to entrepreneurs and startup companies across the state, and one you may want to consider when forming your own company.

What Is Benefit Corporation Status?

Benefit Corporation Status is a type of corporation that allows a for-profit entity to pursue certain societal goods in addition to maximizing profits for investors and shareholders. For instance, a company may pursue goals of minimizing environmental impact, or of increasing civic involvement in a community.

Traditionally, corporations are tasked with growing their revenue and maximizing profits above all other agendas, which can create outcomes that are ultimately less beneficial to society. For example, if products that damage the environment are consistently less expensive than products that are good for the environment, corporations will lean toward the cheaper, but more harmful, products in order to minimize expense and maximize profit.

Benefit corporations allow companies to circumvent these types of conundrums by declaring an interest in non-profit as well as for-profit goals. This allows companies to take a more holistic approach that benefits individuals beyond their wealthy stakeholders.

What Does a Benefit Corporation Require?

Becoming a benefit corporation requires three fundamental steps that are different from normal corporate status. First, the benefit corporation must declare a public benefit purpose. Under California law, this public benefit can include any of the following:

  • Preserving the Environment

  • Promoting Arts and Sciences

  • Helping Low Income of Underserved Communities

  • Promoting Public Health

While these types of public benefits are examples, they are not an exhaustive list and California law permits any public benefit purpose that truly supports a public good.

Once this public benefit is established, officers and directors at the corporation are required to consider this public benefit during their decision-making, and evaluate how any particular decision is likely to impact the public goods that they have chosen to focus on.

The corporation must also report on the ways that its actions have helped or hurt such public benefits. This allows the public to independently evaluate whether the corporation is meeting the objectives it has set out for itself beyond simply increasing profit.

If you are just starting out as a corporation, this process allows you to achieve benefit corporation status from the get-go. If you are working with an existing corporation that is considering transitioning to benefit corporation status, it is required that two-thirds of shareholders agree with such a status change before it can be implemented.

The “Benefits” of Benefit Status

Consumers are increasingly looking to patronize companies whose missions and goals align with their own. Benefit corporation status allows corporations to clearly signal to consumers what their goals and principles are, and how they are working to support those objectives.

Benefit corporation status also gives officers and directors more flexibility in making decisions on behalf of a company, as they are not bound to consider only those outcomes that best maximize profits.

California Lawyers Advancing Corporate Welfare Through Benefit Status

Whether you are an entrepreneur just starting out or a seasoned business professional interested in broadening  the objectives of your corporation, benefit corporation status may be an important strategic change worth considering. At CKB Vienna LLP, our transactional attorneys can work with you to evaluate how benefit status can positively impact your company and your community as well. For more information, contact us online or at 909-980-1040.