Business owners often want to form a company that has a positive effect on society but still makes a profit for its shareholders. This type of business entity is called a Benefit Corporation, sometimes called a Public Benefit Corporation.
Business organizers that have an interest in effecting positive change for the public but do not want not to make a profit or pay taxes generally form a Non-Profit Corporation, sometimes called an Exempt Corporation
Both Benefit Corporations and Non-Profit Corporations require additional language in their Certificate of Incorporation, in the form of a Benefit Statement (for a Benefit Corporation) or a Mission Statement (for a Non-Profit Corporation). There are distinct differences in the language of these two statements.
A Benefit Corporation’s Certificate of Incorporation should list the company’s altruistic aims via its Benefit Statement, which should outline the societal benefits the company wishes to impart in addition to earning profits for the company and its shareholders.
Let’s take a look at some examples of a Benefit Statement:
Patagonia’s Benefit Statement is to “build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.”
DanoneWave, the largest benefit corporation in the United States, is a result of the recent merger of Dannon and WhiteWave, both creators of “health-focused” foods. DanoneWave’s Benefit Statement is “to produce healthful foods that create economic and social value and nurture natural ecosystems through sustainable agriculture […] by offering a wider choice of better-for-you and great tasting food and beverage alternatives for any moment of the day. […]. We are also working with some of our former partners to plant non-GMO feed. We’re also committed to sustainable agriculture, water conservation, waste reduction, animal welfare and community engagement.”
King Arthur Flour, founded in 1709 and now entirely employee-owned: “Our mission is to inspire connections and community by spreading the joy of baking.”
Laureate Education became the first for-profit college to enter the world of benefit corporations. Its Benefit Statement is “to produce a positive effect for society and students by offering diverse education programs both online and at campuses around the globe. By doing so, Laureate believes that it provides greater access to cost-effective, high-quality higher education that enables more students to pursue their academic and career aspirations.”
A Benefit Statement should summarize how the company intends to balance the financial interests of the shareholders with its own goals to improve a segment of society. The intent to make a profit is clear, but so is the intent to change the world for the better. The Delaware Secretary of State’s office will evaluate your Benefit Statement and grant you Benefit Status.
A Non-Profit Corporation can be formed for a limited variety of purposes, according to IRS Regulations. It can nurture amateur sports competitions or be formed for educational, literary, artistic, public safety, scientific, charitable or religious purposes.
Once the non-stock mission is established in the filed Certificate of Incorporation, the company must then qualify under Section 501(c) of the IRS Code. Part of doing so is preparing the corporation’s Mission Statement, which declares the specific mission toward bettering society and does not include any duty to the shareholders in terms of profit.
Some examples of a Mission Statement are:
ACLU: “For almost 100 years, the ACLU has worked to defend and preserve the individual rights and liberties guaranteed by the Constitution and laws of the United States.
ASPCA: “To provide effective means for the prevention of cruelty to animals throughout the United States.
American Museum of Natural History’s Mission Statement is “to discover, interpret, and disseminate information about human cultures, the natural world, and the universe through a wide-ranging program of scientific research, education, and exhibition.”
Monterey Bay Aquarium’s Mission Statement: To inspire conservation of the ocean.
One can see how a benefit statement and mission statement vary in their intents. A Benefit Corporation clearly wants to earn a profit for its shareholders while also improving the world in some way. On the flip side, a Non-Profit Corporation’s mission statement is visibly more focused on fixing or helping a problem within society regardless of earning a profit.
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.