Corporations Mission-Driven Entrepreneurs Should Know About Part 1

If you’re a mission-driven entrepreneur doing business in California, here are two for-profit business entities you should know about. Other types of corporations include a cooperative corporation and a nonprofit corporation, which I will cover in future articles.

Social Purpose Corporation

A social purpose corporation is a for-profit corporation, but unlike a typical for-profit corporation, where the board of directors’ duty is to maximize shareholder profits, a social purpose corporation requires the board to take the corporation’s special purpose into account when engaging in activities.

This can be a charitable purpose or it can take into account the needs of the company’s (i) employees, vendors, and customers; (ii) the community and society; or (iii) the environment.

A social purpose corporation cannot act in a way that goes against its stated social purpose even if it would maximize shareholder profit. To change the social purpose, at least ⅔ of each class of the outstanding shares must vote to change the purpose.

Benefit Corporation

A benefit corporation is also a for-profit corporation. Unlike a social purpose corporation, which only has to take its shareholders and its special purpose into account, a benefit corporation has to take into account the public at large, a number of stakeholders, including shareholders, employees, customers, vendors, the community, and the environment.

Contrast B-Corp

A Benefit Corporation is not the same as a “B-Corp.” Any corporation can be a B-Corp, as long as it receives certification from the B Lab nonprofit. To obtain certification, a company must meet the standards set forth by B Lab, including standards for social and environmental performance, accountability and transparency, and pay an annual certification fee from $1,000 to $50,000, depending on annual revenues.

#socialpurposecorporation #benefitcorporation