In June 2015, Florida became the 25th state that allows Florida corporations to operate for the benefit of a social purpose. Through Senate Bill 654, the Florida legislature enacted legislation that created two new forms of corporate enterprise: the social purpose corporation and the benefit corporation. The purpose in creating these new entity forms is to allow “allow businesses to engage in societal benefit programs that may not involve or satisfy the traditional corporate norm of profit maximization.”
Sen. Jeff Clemens, D-Lake Worth, who co-sponsored the legislation, stated that the new law is “a great way to attract a different kind of entrepreneur and create jobs.” Clemens believes that the new law will help bring a new kind of social entrepreneur to the state: one that focuses on the triple bottom line of profits, people and planet. Throughout the United States, there are about 1,000 companies that are legally formed as benefit corporations, including Patagonia, Method, and Plum Organics. Clemens hopes that once investors understand that consumers want to transact with socially-minded businesses then more venture capital will be invested in benefit corporations.
What Is a Benefit Corporation?
A benefit corporation must pursue a general public benefit, “which is a broad purpose intended to encompass a broad range of social and environmental factors that are impacted by the corporation.” Instead of solely maximizing profits, directors and officers are required to consider how the actions of a company affect the company’s socially-minded purpose. In a normal for-profit corporate structure, directors and officers could be liable if they pursue or achieve social goals over maximizing shareholder profits.
What is a Social Purpose Corporation?
A social purpose corporation is slightly different than a benefit corporation. The main difference between these two entities is the public benefit purpose required by each type of corporation. In particular, a social purpose corporation must pursue or create one or more public benefits. These public benefits can be very specific. Conversely, a benefit corporation is formed to pursue a general public benefit. Nevertheless, a benefit corporation may still adopt additional specific public benefits. Examples of statutory public benefit purposes include protecting or restoring the environment, improving human health, or promoting the arts, sciences, or advancement of knowledge.
Despite this difference, social purpose and benefit corporations both have the same primary purpose: to allow directors and officers of the corporation to pursue the twin goals of public benefit and profit maximization. Furthermore, benefit and social purpose corporations are distinguishable from charities and not-for-profits because these corporate forms are formed to make and to retain profit.
Questions About Forming a Non-profit?
If you have questions regarding starting or a non-profit in Florida, an experienced nonprofit lawyer from Walsh Banks Law can answer your questions. Walsh Banks Law has extensive experience helping entrepreneurs and small businesses with a broad range of legal issues.