Benefits of Being a Benefits Corporation for Employers
Back in 2014, Florida became the 25th state in the country to allow “Benefit Corporations.” What is a benefits corporation, and how does it benefit employers and/or employees?
Learning More About Benefits Corporations
A benefits corporation is a title that refers to a particular for-profit corporation that pursues public interest goals at the expense of profit maximization. Prior to Florida’s law taking effect, the benefits that are now provided for a benefits corporation were limited to non-profit, or not-for-profit corporations (which many of us know more as 501(c)(3) corporations).
As The Florida Bar Journal article explains, the legislation in our state not only created the benefits corporation, but it also established something known as a “social purpose corporation.” These are two distinct entities, but they both differ from traditional corporations in several ways. The article lists the following ways in which benefits corporations and social purpose corporations look different from other for-profit corporations:
First, they have a “statutory purpose to engage in public benefit activities,” which occur in addition to public benefit goals that the corporation establishes;
Second, the directors and officers of these corporations have a statutory mandate “to consider the effect of any corporate action or inaction upon the corporation’s public benefit goals”; and
- Third, both benefits corporations and social purpose corporations must create a mandatory report that explains how the corporation has attempted to achieve its public benefit goals.
What is the ultimate difference between a benefits corporation and a social purpose corporation? In brief, the article suggests that the most basic difference between the two is in their “commitment to broad public benefit goals.”
What Benefits do Benefits and Social Purpose Corporations Provide?
Ultimately, there are numerous benefits to employers who want to dedicate part of their business initiatives to public interest aims while still retaining a for-profit corporation. In Florida, entrepreneurs are given the option, through statute, “to form either a benefit corporation with broadly stated general public goals or a social purpose corporation that may have a single or more limited public benefit agenda.”
And one of the major benefits for entrepreneurs who want to form a benefits corporation is that their directors and officers “will not have or perceive the same constraints on the use of corporate assets that exist with traditional corporations.” In other words, and in very broad terms, benefits corporations can use more assets to engage in public interest work than can traditional corporations. As such, employers within a benefits corporation—or a “B Corporation” as it is commonly known—can hire more employees who will work toward public interest goals.
If you have questions about forming a benefits or social purpose corporation, or if you have questions about the duties you owe to potential investors or to employees, an experienced labor lawyer can assist you. Contact Scott Wagner and Associates, P.A. for more information about our services.