Starting a Business S Corp vs. LLC
LLCs and S corporations are different aspects of business operations, but are not mutually exclusive. Use this guide to learn more about the difference between an LLC vs. an S corporation.
Benefit corporation status protects company missions through capital raises and leadership changes, creates more flexibility when evaluating potential sale and liquidity options, and prepares businesses to lead a mission-driven life post-IPO. Learn more to see how your business can become a benefit corp. A benefit corporation is a legal tool to create a solid foundation for long term mission alignment and value creation. It protects company missions through capital raises and leadership changes. Benefit corporation structure creates more flexibility when evaluating potential sale and liquidity options. It prepares businesses to lead a mission-driven life post-IPO (initial public offering). Due to law and culture, directors of traditional for-profit companies must maximize the financial returns to shareholders. This single focus is called shareholder primacy. This inflexible legal framework does not accommodate for-profit entities whose mission and impact is central to their business model. Benefit corporation status allows corporations to opt-out of shareholder primacy and opt-into stakeholder governance. With stakeholder governance, a company is required to take into consideration anyone that is materially affected by that company’s decision-making, like workers, customers, local communities, wider society and the environment. A benefit corporation is a traditional corporation with modified obligations, committing it to higher standards of purpose, accountability and transparency:
For more in-depth discussion of benefit corporations and the legal justifications and the implications for adoption check out the following sources:
Benefit corporations and Certified B Corporations are often confused. They share much in common and are complementary, but have a few important differences. Benefit corporations and Certified B Corporations are both leaders of a global movement to use business as a force for good. Both meet high standards of accountability and transparency. Both create the opportunity to unlock our full human potential and creativity to use the power of business for the higher purpose of solving society’s most challenging problems.
Companies can adopt benefit corporation status in any state/ province where legislation has been passed. Existing companies can elect to become benefit corporations by amending their governing documents. Amendment requires a supportive vote of all shareholders in most states/ provinces. The procedure for filing amendments with the state/ province is the same as any other corporate structures with the addition of a statement that the company is a benefit corporation. A company should consult with a legal representative before taking any action. Below are a few tools to educate companies who are interested in becoming a benefit corporation:
A Registered Agent is the liaison between the company and the state/ province in which the company is formed. Their job is to forward any service of process, such as a lawsuit that may be served against the company, and also to pass along any Franchise Tax or annual report notices from the state/ province. Registering Agents familiar with benefit corporations are listed below: CT Corporation Harvard Business Services, Inc.
All benefit corporations must create a benefit report to meet transparency requirements. (In Delaware it does not need to be released to the public nor does it need to use a third party standard as an assessment tool. It is considered best practice to do both). These transparency provisions serve to inform the public about the overall social and environmental performance of the benefit corporation. They also serve to inform shareholders and directors so they are better able to meet their duties. Judges may look to a benefit report, or series of annual benefit reports, to determine if the benefit corporation has met its statutory requirement for its general, and any specifically named, public benefit purpose. The specific logistical and content requirements for benefit reports differ slightly depending on the state/ province. To determine your state/ province’s exact requirements, discuss with legal counsel or reach out to the Secretary of State (in the U.S.). The information on this page does not constitute legal advice and is provided solely as a reference. Benefit Report Best PracticesA report should include a description and an assessment of the overall social and environmental performance of the benefit corporation measured against a third-party standard. The third party standard applied should be consistent with that standard in prior benefit reports, or should be accompanied by an explanation of the reasons for any inconsistent application. The description should include:
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