Delaware Introduces the Public Benefit LLC

By Brett Melson Monday, November 26, 2018

Delaware PBC LLCYou don’t have to wait any longer. The Delaware Pubic Benefit LLC is available to entrepreneurs and investors seeking to do good while profiting. Public Benefit Corporations have been provided for under Delaware law for several years. However, the law governing Delaware Limited Liability Companies has been amended recently, so for the first time in Delaware’s corporate law history, an LLC may elect to be a “Public Benefit LLC.” A Public Benefit LLC is a for-profit entity; however, in operating a Public Benefit LLC, the LLC’s management can take into account social, economic and political considerations without violating its fiduciary duty to act in the best interests of the company. 

A Public Benefit LLC may consider a number of factors—the effect of corporate action on the company’s employees, a neighborhood or region in which the company operates, certain minority groups or special interest groups, environmental concerns stemming from corporate action or inaction, or the desire to avoid perceived mistreatment of a group of persons—without being in breach of its financial obligation to act in the best interests of the company. 

An LLC wishing to elect Public Benefit status must include a Public Benefit Statement in its Certificate of Formation and cannot elect to terminate its status without a two-thirds vote of the members. In addition, the LLC’s limited liability company agreement should articulate in detail the “public benefits” that management may consider in operating the LLC.  Clear articulation of public benefit factors provide the LLC with greater clarity in acting within the parameters provided in the formation document.

Every two years, a Public Benefit LLC must provide its members with information regarding its advancement of the public benefit(s) it seeks to promote, which must include:

  1. The objectives that have been established to promote the LLC’s stated public benefit goals;
  2. The standards the LLC is using to assess its progress in promoting its stated public benefits; and
  3. An assessment of the LLC’s success in meeting its objectives and progress goals.

The advantage of a Public Benefit LLC comes largely in the way that it can be marketed. By formally electing the Public Benefit LLC status, officers of the LLC show a level of commitment to the public benefit(s) selected, and provide investors with a standard of expectations and guidelines. It is true that what is provided for in the statute governing a Public Benefit LLC could be accomplished through a standard LLC Operating Agreement. However, founders who choose a Delaware Public Benefit LLC add a formal qualification to their company—one that can be touted when seeking investors. 

Harvard Business Services, Inc. can assist with the formation of the Public Benefit LLC, please call us at 800 345 2677 ext 6900 or email brett@delawareinc.com with any questions!

Disclaimer

THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND HARVARD BUSINESS SERVICES, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF DELAWARE'S CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.

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