Should You Consider a Benefit Corporation for Your Social Enterprise?
For entrepreneurs with a larger purpose than merely maximizing profits, forming a benefit corporation may make sense. Benefit corporations are formed with social impact in mind and are appropriate vehicles for entrepreneurs who want to avoid greenwashing or other corporate ills.
Effective July 1, 2014, Florida joined the growing number of states that permit the creation of benefit corporations and social purpose corporations. These are for-profit corporations that pursue substantial public interest goals at the possible expense or deferral of profit for their shareholders.
Both benefit corporations and social purpose corporations must have a statutory purpose to engage in public benefit activities, in addition to whatever specific public benefit goals may be adopted in the articles of incorporation; a statutory mandate to directors and officers to consider the effect of any corporate action or inaction upon the corporation’s public benefit goals; and a mandatory annual report to shareholders describing the efforts of the corporation to achieve the statutory and any specifically adopted public benefit goals.
The distinction between a benefit corporation and a social purpose corporation is a matter of degree. A benefit corporation must have a general social purpose and is accountable to the best interests of its employees, shareholders, and other stakeholders. A social purpose corporation is somewhat less-restrictive, and may have a more specific social purpose with less accountability to stakeholders.
Benefit corporations and social purpose corporations each provide legal protection to its directors and shareholders similar to a traditional C-corporation, but with a balance of fiduciary duties between financial responsibility and social purpose when making decisions. The roie of the Board of Directors is therefore somewhat expanded, requiring that they make decisions based on the interests of shareholders, employees, customers, the community, the corporation’s social purpose, and the corporate mission. Directors are required to report not only on the corporation’s financial picture but also on its work towards the corporation’s social benefit goals.
Existing corporations can convert to benefit corporations or a social purpose corporations by amending their Articles and Bylaws accordingly.
Social activists, mission-driven entrepreneurs, and anyone looking for a vehicle for change while turning a profit might wish to consider forming a benefit corporation or a social purpose corporation under Florida law. If you have questions about how a benefit corporation would fit for you, please call us at 407-792-0790.