Benefit Corporations: One More Option for Business Owners

Benefit Corporations: One More Option for Business Owners

civil litigation lawyer Lafayette Indiana

Mallory Deardorff-Dawson

Posted by Mallory Deardorff-Dawson, on February 10, 2017

When a business chooses which organizational form it should take, it is faced with many options including Corporations, Limited Liability Companies, Partnerships, Limited Partnerships, etc. Beginning in 2016, Indiana now provides companies with an additional option—the Benefit Corporation.

Under a recently enacted law, a business may choose the Benefit Corporation organizational form, which provides the advantages of being a Corporation while also allowing the business to put a focus on helping the public. This new law recognizes that, for many companies, benefitting the general public is also in the best interests of the company. Through the use of a Benefit Corporation form, businesses do not necessarily have to choose between the “bottom line” and “doing the right thing.”

A Benefit Corporation differs slightly from other organizational forms in that its articles of incorporation must include the added purpose of creating “a material positive impact on society and the environment.” IC 23-1.3-2-7. In its articles of incorporation, the company may identify one or more public benefits that it wishes to promote, including causes such as helping low income or underserved people or communities, conservation of the environment, promoting economic opportunity for individuals in the community other than simply creating jobs, and promoting the arts or sciences. IC 23-1.3-2-10.

Essentially, a Benefit Corporation acts as a hybrid of a Corporation and a Not-for-Profit Organization. However, it is different from a Non-Profit in the directors of the company are allowed to profit from the year-end dividends, unlike the directors of a Non-Profit. The difference between a Benefit Corporation and a regular Corporation is that the organizational form allows the company to put resources toward various causes or benefits without the shareholders of the company holding the board of directors liable for not creating the largest possible profit for the company.

Although many new start-ups are choosing this organizational form, pre-existing companies may also choose to become Benefit Corporations. An existing Corporation may become a Benefit Corporation by amending its articles of incorporation.

In deciding whether the Benefit Corporation form might be a good fit for your business, you should consult with an experienced attorney who can advise you as to the advantages and drawbacks of each type of organizational form.

**Reiling Teder & Schrier, LLC is an Indiana Limited Liability Company. The information contained in this website has been prepared by Reiling Teder & Schrier, LLC for informational purposes only, and is not legal advice. The information on this website should not be relied upon to make any decision, legal or otherwise. If you have any specific questions or inquiries regarding any of the information contained in this website, you should consult with an attorney licensed in your state. The information contained in this website pertains only to matters of Indiana law and the laws of other states may be completely different from the laws of the State of Indiana.