In Business to Do Good
By Don Formoso
Last fall, Pennsylvania enacted the Pennsylvania Benefit Corporation Act, making it one of 12 states to recognize this new form of business entity. Like a traditional Business Corporation, a Benefit Corporation is organized and conducted on a for-profit basis. Unlike a Business Corporation, however, a Benefit Corporation is required to consider the effect of its actions on parties other than shareholders, and must have a purpose dedicated to create a positive impact on society. Examples of these types of companies are those that are committed to energy efficiencies, ensuring that workers are paid a fair wage, or dedicated to creating a positive social change in the community.
Officers and directors of a Benefit Corporation must consider nonfinancial interests in making corporate decisions, such as the interests of employees, customers and the local environment. While corporate directors are already permitted to consider these factors, the Benefit Corporation Law requires such consideration. Additionally, a Benefit Corporation is required to report its public benefit activities on an annual basis, and must engage an approved third party to provide an assessment of its performance. Information that would otherwise remain private in a Business Corporation, such as the names of certain shareholders, will become public.
While operating as a Benefit Corporation will result in additional reporting requirements and public scrutiny of operations, many state and local governments are beginning to enact tax incentive programs to entice business owners to form or operate as a Benefit Corporation. For businesses already operating with a mission in mind, Benefit Corporation status may prove to be worthwhile.
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