Is a public benefit corporation right for your mission-driven business? | Mintz – Viewpoints on Energy and Sustainability

This article is for founders who have an idea for a mission-driven business and want to know what to do next.

Why does this article focus on Delaware?

Delaware has become internationally recognized as home to over one million legal entities, including the majority of all Fortune 500 companies. With a well-established and respected corporate justice system and business-friendly tax, legal and regulatory policies , Delaware is a great place to incorporate with key incentives including tax benefits, efficiency, and privacy. State laws, such as the Delaware General Corporations Act (“DGCL”), are highly valued for providing shareholders and companies with maximum flexibility and a business-friendly legal environment.

What is a “traditional” society?

A corporation is a separate legal entity from its owners (shareholders) and the people who run the business (the board of directors). Often referred to as a “legal person”, a corporation has many of the same rights and responsibilities as individuals, meaning it can own assets, enter into contracts, sue and be sued, pay taxes, and lend and borrow money.

What does “incorporate” mean?

Incorporation refers to the legal process of forming a business structure or corporation. This process involves various steps, such as the creation of articles of incorporation, the implementation of the articles of association, the election of officers and the issuance of shares to shareholders. By definition, corporations are completely separate entities from their owners (shareholders). This means that corporations are limited liability entities, so their owners are not personally liable for the company’s debts, but can participate in profits through dividends and stock appreciation. Care should be taken to ensure that “social formalities” are followed to maintain this limitation of liability.

What is a “PCB”?

A public benefit corporationCBP”) is a corporation created to generate a public good (“public benefit”) and operate sustainably and responsibly. A company can be incorporated from the outset as a PBC, or it can be converted to a PBC. Unlike traditional corporations that prioritize maximizing shareholder value, PBCs balance the financial interests of stakeholders, the interests of those involved and affected by the corporation (such as employees, customers, creditors and suppliers) and the advancement of their public interests. Benefit to. In addition, PBCs are required to submit to accountability audits and assessments and report on their progress in delivering their public benefit. Although the terms are sometimes used interchangeably, PBCs are distinct from B corporations (“Body B”). The term B Corp refers to for-profit entities (including corporations and LLCs) that have paid a fee to be reviewed and certified by a national non-profit organization called B Labs.

Do you have a handy chart comparing the two?

Why yes, we do.

Should I make this decision now?

No – Delaware law allows a company to convert to a PBC, but it adds additional costs (filing fees and legal fees) and approval requirements.

OK, so do I have to make this decision now?

If you think you might want to be a PBC, incorporating from the start will save you time and money.

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Luisa D. Fuller