A benefit corporation is a new legal form of U.S. corporation established by state statutes that allows a business to prioritize a social objective over a financial bottom line. A benefit corporation may pursue stakeholder benefits and larger social interests over shareholder value, though are otherwise similar to standard for-profit businesses in that they may make profits, may be shareholder owned and pay stock dividends.
Why is this legislation necessary?
The need for benefit corporation legislation often cites two court cases: 1919's Dodge v. Ford, in which shareholders reversed Henry Ford's decision to use excess capital for social benefit instead of shareholder dividends; and more recently, eBay Domestic Holdings, Inc. v. Newmark, in which Newmark, the majority owner of Craigslist, had to reverse several policies on the grounds that fiduciary duties were being violated by prioritizing the rights of their user community over shareholder gain. Some experts argue that the rulings of these cases do not preclude a director from making a choice that does not realize immediate shareholder gain, but benefit corporation legislation seeks to eliminate this ambiguity and allow directors to make their choices with confidence.
Are benefit corporations social enterprises?
The concept and scope of social enterprise is quickly expanding, but the Social Enterprise Alliance provides a useful working definition: "A social enterprise is an organization or initiative that marries the social mission of a non-profit or government program with the market-driven approach of a business."
As such, benefit corporations are social enterprises, along with a growing list of other business forms, such as low-profit liability companies (L3Cs), flexible purpose corporations, and other types of social businesses and hybrid organizations.
Are benefit corporations the same as B Corps?
No, not all benefit corporations are B Corps, and not all B Corps are benefit corporations. Benefit corporations are a state-designated business structure, while B Corps are companies that meet the standards of and are accredited by B Lab. B Lab is a non-profit that provides a certification platform, impact measurement resources, and benefit corporation legislation advocacy.
Where can I find a benefit corporation?
As more states adopt benefit corporation legislation, benefit corporations are becoming increasingly common. Some high-profile examples include Patagonia, Badger and King Arthur Flour.
If you would like to find a benefit corporation in your area, we recommend the tool available at:
We cannot vouch for its to-the-minute accuracy, as benefit corporations are frequently being created and closed, but it maintains a generally useful index.