Benefit Corporations — A Sustainable Form of Organization?
Dana Brakman Reiser
Brooklyn Law School
46 Wake Forest L. Rev. 591 (2011)
Brooklyn Law School, Legal Studies Paper No. 293
This article discusses the “benefit corporation,” a legal entity designed to house socially minded businesses. The form differs significantly from the traditional nonprofit corporation by imposing no constraint on distributions. Thus, benefit corporations may utilize equity financing. Distinct from traditional business corporations, however, benefit corporations must pursue "a general public benefit" and must require directors to consider constituencies other than shareholders in making decisions. Intriguingly, unlike the charitable bona fides of nonprofit organizations, the public benefit provided by benefit corporations is vetted by independent, third party standard setting organizations rather than by state government officials. This aspect also distinguishes them from other hybrid forms currently under development. After describing the new form and situating it in the dynamic hybrid form context, the article uses the benefit corporation as a case study to consider whether and how hybrid organizational forms can meet the desires of the social enterprise founders.
Number of Pages in PDF File: 36
Keywords: Social Enterprise, B Corporation, Benefit Corporations, Hybrid Organizations, L3C, Charity, Nonprofit, Philanthropy
Date posted: September 11, 2012