pexels-photo-57825.jpegWe continue our series on Legal Perspectives for Entrepreneurs in partnership with the dynamic group of ladies behind the law firm,?Smith, Shapourian and Mignano LLP, an all-female practice in San Francisco, California that helps small businesses understand their legal requirements. In our previous posts, we?ve discussed becoming a sole proprietorship vs. a LLC company and most recently, we?ve learned the importance of having website privacy policies in place. Today, we will find out what a benefit corporation is and how it might be the right choice for your company.

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A benefit corporation, as defined by 30 states in the U.S. and the District of Columbia, is a for-profit corporation that promises to have a positive impact on society, workers, the community and the environment in addition to their normal profits as legally stated in their list of goals. ?If this sounds appealing to you, you might be in line to begin to incorporate into a benefit corporation. Smith, Shapourian and Mignano LLP, say it?s smart to choose a benefit corporation over other for-profit entities, like a C corporation (where profits are taxed separately from their owners) or an LLC because it legally protects your social goals and shows your audience that you?ve got more on your mind than just bringing in money without giving something back. (Learn about the new way your audience is getting their news.)

The directors can be held liable by the company or its stakeholders, not just the shareholders that appointed them, if they do not prioritize/accomplish the beneficial goals stated in the Articles of Incorporation by way of a public benefit enforcement proceeding brought by the benefit corporation itself, or derivatively by a shareholder, a director, or a person or group owning 5 percent or more in corporate equity.


Another big way that a benefit corporation can be the best choice for your company is if you?re considering getting funding through equity financing, meaning you?re interested in selling shares to fund your business. If you want to learn more about financing, check out my tips on investing.

Incorporating your company as a benefit corporation distinguishes your company from other companies seeking investment.


If this sounds like something you are increasingly becoming interested in, you?ll want to know the requirements for making this happen. The ladies say it?s actually a little easier than you might think. Here they break it down into three steps:

Step 1: Disclose that your company is a benefit corporation within its ?Articles of Incorporation.? Additionally and as a best practice, you may include the specific purpose of your company as well.

Step 2: Your company?s share certificates must specifically state the beneficial nature of the corporation.

Step 3: You must publicly disclose (and post to your website, if you have one) an annual report which measures your company?s overall social and/or environmental performance against a third-party standard which meets statutory requirements. The process for selecting this third party standard must be disclosed within the annual report. The purpose of this annual report requirement is to promote corporate transparency and incentivize the benefit corporation to prioritize/accomplish its beneficial goals.


When drafting your purpose statement, take a look at this excerpt from my own to make sure you include the correct information for your benefit corporation:

(a) The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the California General Corporation Law other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code. Notwithstanding the foregoing, the purpose of this Benefit Corporation shall be to create a general public benefit including, but not limited to the specific public benefit of:

  • Providing low-income or underserved individuals or communities with beneficial services by providing pro-bono consulting work to deserving non profits and underserved population.

The general and specific public benefits created by this Benefit Corporation shall be deemed to be in the best interests of the Benefit Corporation

  • This corporation is a benefit corporation.

If you?re a business owner that?s looking to bring in revenue but still want to make an impact on your community and world, then a benefit corporation is for you. Your consumers will also appreciate the fact that they are buying goods and services that will give back to the community. It?s really a win-win for all involved. If you need help incorporating your enterprise into a benefit corporation, let us help you get organized.