Common Public Benefit Corporation Terms
When it comes time to form a new Delaware company, clients sometimes may want to form a new entity that’s overall goal is to contribute to society and still be able to make a profit. If this is a client’s plan, they sometimes will form a Delaware Public Benefit Corporation.
Clients often wonder how they can do something good with their company or maybe they want to help the environment in a positive way. They may want to attract more customers based on how the company will contribute to society. While clients sometimes question how they can become a profitable business with this entity type, they may not be familiar with the overall process for the initial formation or future requirements. Below, are some of the more common terms/topics that are referenced when assisting with a Delaware Public Benefit Corporation formation and other questions we often receive related to this specific entity type.
-Certificate of Incorporation – When forming a Delaware Public Benefit Corporation, the formation process is similar to that of a Delaware Corporation formation, as a Certificate of Incorporation will be filed with the state for approval. While the name of the company, the name and address of the Delaware based Registered Agent and the stock structure will be listed on the document, a benefit statement will also have to be listed on the certificate that is filed with the state. And please be advised, the Certificate of Incorporation for a Delaware Public Benefit Corporation will also need to clearly state that the entity is indeed a Public Benefit Corporation. This will be the certificate that is approved by the Delaware Secretary of State.
-Benefit Statement – In order for the Delaware Public Benefit Corporation’s Certificate of Incorporation to be approved by the Delaware Secretary of State, the certificate must include an additional article that contains the detailed benefit statement on how the company plans to contribute to society in a positive way or specifies the company’s overall goals.
-Stock Structure - One factor many clients neglect to consider is the stock structure of the Public Benefit Corporation. Similar to a Delaware Corporation, a Public Benefit Corporation will have shares of stock that are issued to shareholders to show ownership as the company is still aiming to make a profit while operating. Shares can be issued internally within the Public Benefit Corporation. Clients sometimes issue stock certificates to their shareholders and these stock certificates must also clearly list the words “Public Benefit Corporation.” And in addition to shareholders, just like Corporations, the Public Benefit Corporation will also have Directors and Officers.
-Annual Delaware Fees/Annual Requirements - Just like a Delaware Corporation, the Delaware Public Benefit Corporation will also owe an annual Delaware Franchise Tax and be required to maintain a Delaware Registered Agent. And similar to the Delaware Corporation, the franchise tax fees for a Delaware Public Benefit Corporation are also based on the number of shares the corporation has authorized. A Public Benefit Corporation with 1-5,000 authorized shares is assessed $225 in franchise taxes. A Public Benefit Corporation with 5,001-10,000 authorized shares is assessed $300 in franchise taxes and a Public Benefit Corporation with 10,001 shares or more will be assessed a minimum of $450 in franchise taxes. The franchise tax for the Delaware Public Benefit Corporation is due by March 1 of every year.
In addition to the annual Delaware fees, it’s important to note that the Board of Directors within a Delaware Public Benefit Corporation must also provide a Benefit Report every other year (at least) to the shareholders of the company. The Benefit Report is not required to be made available to the public unless the company wishes to do so. This report generally includes information pertaining to the steps on how the company’s overall goals will be achieved or state whether they have been achieved. Essentially the report will provide overall details as to the Public Benefit Corporation’s success.
-Amendment – Clients are sometimes not very familiar with the Public Benefit entity type and may have already formed their Delaware company. Perhaps, you may have already formed a Delaware Corporation and now wish to have a Public Benefit Corporation. An Amendment can be filed with the Delaware Secretary of State for approval to amend the Corporation to a Public Benefit Corporation. Or, maybe, you formed a Delaware LLC and now wish to convert the entity type to a Delaware Public Benefit Corporation. A Certificate of Conversion and a new Certificate of Incorporation can be filed with the Delaware Secretary of State to convert the entity in Delaware.
Benefit statements, stock structure, and Certificates of Incorporation are just some of the topics that clients discuss when inquiring about how to form a Delaware Public Benefit Corporation. There can be many questions clients have throughout this process and at Harvard Business Services, Inc. we’re always happy to assist!
If you plan on forming a new Delaware Public Benefit Corporation and obtaining an EIN, or if you have any questions regarding the formation process, we can be reached at 1-302-645-7400 or 1-800-345-2677 ext. 6900 or via email at info@delawareinc.com. We can also be reached via skype at delawareinc.
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