Benefit Corporation

Benefit Corporation

A benefit corporation is a type of business that allows for-profit, mission-driven companies to pursue positive benefits to society as part of their legally defined goals, and that doing so is in the best interest of the corporation. So, the directors and officers of the company don’t have to make decisions based solely on maximizing the wealth of shareholders.

Instead, they can also think about the effects on non-financial stakeholders like workers, the community, the environment, etc., without putting their fiduciary duty at risk. Benefit corporations meet the needs of entrepreneurs who want their businesses to solve social and environmental problems. They do this by giving directors the legal protections they need to look out for the interests of all stakeholders, not just the shareholders who elected them.

Benefit corporation status also helps with marketing, because it lets companies stand out to customers who want more accountability and responsibility from businesses. It also keeps the company’s mission safe during changes in leadership and when more money is raised. Benefit corporations are also known for being open, since they have to report regularly on their social and environmental performance based on standards set by a third party.

Since 2010, most U.S. states, including Delaware, have had laws that make it possible to create benefit corporations. There are laws about benefit corporations in places other than the U.S., like Italy. Benefit corporations are often confused with certified B Corps, but they don’t have to be certified. However, companies that want to become certified as B Corps should form as benefit corporations. People often use Patagonia as an example of an important benefit corporation.

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