By Sutter Law, San Francisco Business Law Firm
What is a California Benefit Corporation (B Corp) (California Corporations Code sections 14600-14631)
Sutter Law is a San Francisco Business firm and we have been getting a lot of requests for the newest type of Corporation. Experienced business attorneys know to ask the right questions and guild their clients to the best entity for them. This blog has some of the pros and cons of the Benefit Corporation, keep in mind it is very important to consult with an experienced business attorney before filing with the Secretary of State.
On January 1, 2012, California became the sixth State to authorize Benefit Corporations. The California State legislator signed a bill allowing the Secretary of State the power to issue Benefit Corporations (B Corp). The first questions everyone asks are: What is a benefit corporation, and who does it benefit? The short answer is a benefit corporation is a combination between a for-profit corporation and a non-profit. This new model allows entrepreneurs and investors to pursue both profits and social benefits. The Benefit Corporation gives new companies the opportunity to pursue the triple bottom line
without the threat of shareholder lawsuits. There is a significant number of entrepreneurs who are about more than just the money; they want to change the world. For this reason, the California legislature enacted the Benefit Corporation, so that do-gooders can do good and make some good green along the way.
There are two ways to become a Benefit Corporation:
File free-form articles with the California Secretary of State. Since this is such a new business entity, there are no standard forms for filing yet; therefore, you must use the California C Corporation form with added language, file through the California Secretary of State, pay the fee, and incorporate specific language into your By-Laws.
You can become a Certified Benefit Corporation through Bcorporation.net, which requires a few steps:
- Take the B Impact Assessment
- Complete an Assessment Review
- Submit Supporting Attachments
- Begin Adopting the B Corp Legal Framework
- Pay the Certification Fees
Since the B Corporation is so new, we are left with many questions:
What obligation do the shareholders/owners have if they incorporate as a Benefit Corp?
- Can the shareholders sue if the Chief Financial Office is not living up to the statute?
- Will venture capitalists invest with a Benefit Corporation?
- Can a Benefit Corporation go IPO (Initial Public Offering)?
Since Benefit Corporations are so new to us, these questions may not be answered for a few years.
As California and Federal case law develop, the answers to these questions will emerge. This leads to the question, what are the benefits to a Benefit Corporation?
1. One of the primary benefits is to give the consumer transparency.
2. Enhanced consumer approval. Since the bottom line is not the top priority, it stands to reason that consumers will tend to favor Benefit Corporations over standard corporations.
This article was intended to highlight some of the pros and cons of a Benefit Corporation. For more information and a free consultation, please contact Sutter Law, a business law firm based out of San Francisco, California.
