McMillan Metro, P.C. Helps You Understand What A Benefit Corporation Is And If It’s Right For Your Business
The world is full of smart and ambitious people who are also idealistic and want their business to make more than a profit—they want to make a real difference in society. But the world is also full of people whose idealism has foundered on the rocks of corporate reality and the need to deliver results for shareholders. To solve the conundrum, the state of Maryland introduced a new type of corporation in 2010—the “B Corps”, or benefit corporation. A majority of states have since followed suit. What is a benefit corporation and can it work for you?
Put simply, the benefit corporation includes the fulfillment of stated social goals as a part of their profits and losses statement. The corporate executive who wants their company to be environmentally friendly or generous to the underprivileged no longer has to “swim upstream” against the very structure of their business entity. Now, the fulfillment of that social responsibility is spelled out for the shareholders.
There are a number of ways setting up your business as a B Corp can work for you. There are investors who value the same things you do, and benefit corporation status tells them that investing with you means their money will fulfill that broader social goal. The same goes for the marketplace—consumers who share your beliefs are more likely to spend their money on your product if you’re set up as a B Corp.
The concrete way a benefit corporation does what it’s supposed to do is through mandated reports to the shareholders that must include an assessment of how the company is progressing in fulfilling its social mission. While a standard report from an S Corp or C Corp (the most common types of corporate structures) would just include a profit-loss statement, the B Corp goes to the next level and includes actual reporting on what was done to fulfill the social mission.
It sounds great and in a lot of ways, it is. But that doesn’t mean there aren’t headaches that an experienced business attorney will need to help you navigate through—or better yet, anticipate in advance.
The most important challenge is establishing the proper framework to fulfill the requirements of the statute and maintain your status as a B Corp. McMillan Metro’s experienced lawyers are highly-skilled at keeping the details of your paperwork in proper order.
You’ll also need to be sure you can attract investors to help expand your business and your social goals. It’s imperative that it be understood you aren’t a non-profit entity, and that there are no special tax advantages that come to you or anyone else because of your B Corp status.
The benefit corporation is a way to make your social commitment tangible in a way that others can see and then choose to lend their support. It’s a great way to ensure that making a difference never interferes with the basic structure of your business. But it has to be done right. Contact McMillan Metro today to set up a consultation.