Benefit Corporations - Alabama’s Latest Corporation
Alabama’s Latest Corporation
Alabama’s Latest Corporation
What is a benefit corporation?
A benefit corporation, often called a “B-Corp,” is a for-profit corporate entity. The main purpose of a benefit corporation is the well-being of its community and environment, as well as taking the corporation’s profit and security into account.
This is different from a regular corporation in that the directors have the ability to pursue the benefits of its surrounding community, including but not limited to, its employees, subsidiaries, customers, and environment both locally and internationally. It does not have to solely focus on the most advantageous move for the corporation and its shareholders. The idea of the benefit corporation is the benefit not only lies within the corporation itself.
A benefit corporation is created under state law. To this date, approximately 40 states have passed or are in the process of passing legislation enacting benefit corporations.
What is required to be a benefit corporation?
Similar to other corporations, benefit corporations are formed under the state corporation law. In Alabama, it is Alabama Code § 10A-2A-17.01 to 10A-2A-17.06. Alabama law differs from other states in its requirements for benefit corporations as most follow a form of model legislation.
When starting a benefit corporation from scratch, it must reflect that it is a benefit corporation in its formation documents as well as in its name.
If the corporation is already established, an approval by two-thirds of the shareholders to change into a benefit corporation is required as well as a reflection of the change in corporate documents.
For all benefit corporations in Alabama, a benefit report must be submitted annually to show its growth of the past year in meeting its identified benefit provisions. Such reports must be accessible to the public either through the corporation’s website or it must provide a recent, free, physical report to any requestor.
What are the benefits of becoming a benefit corporation?
Volunteering transparency can make for great marketing. Holding yourself to a higher standard and meeting that standard publicly can distinguish your corporation from others.
A benefit corporation gives flexibility and protection to the directors to favor the corporation’s beneficial mission over the shareholders’ wants and desires.
Instituting a public benefit in the corporation’s formation documents allows the mission to last beyond the individuals of the corporation for as long as the corporation lasts.
Creating a positive vision for the individuals of the company can lead to higher productivity and a well-rounded working environment that doesn’t just focus on the business itself.
Inspiring and leading your community in social change can lead to partnerships and volunteering opportunities with other companies, even competitors.
Contact us if you’d like starting a benefit corporation or converting an existing corporation to a benefit corporation!