A benefit corporation is a relatively new type of corporate structure available to businesses in Florida. It is a for-profit corporate entity designed for businesses that operate in a way that benefits the public. Any business whose mission is to have a positive impact on workers, the community and the environment can apply to be a benefit corporation.
The primary purpose of a benefit corporation should be to create a general public benefit. In Florida, a general public benefit is defined as “a material, positive effect on society and the environment, taken as a whole, as assessed using a third-party standard which is attributable to the business and operations of a benefit corporation.” The directors of a benefit corporation don’t just consider the interests of their shareholders — they must consider the impact of business operations on the world around them.
Benefit corporations share some similarities with C corporations in terms of their transparency and accountability. However, they allow socially-conscious entrepreneurs to retain control of the positive social or environmental mission of their business as they raise capital.
This guide will help you understand how Florida benefit corporations are formed and how they differ from other types of corporate entities. It will also detail the advantages of forming a benefit corporation. If you have any further questions about forming a benefit corporation in Florida, contact FL Patel Law PLLC on (727) 279 5037.
What is a Florida Benefit Corporation?
Traditional corporations have always used profit maximization as their primary goal. Many businesses have had a “do whatever it takes” attitude when it comes to making a profit. In some instances, this attitude has had a negative impact upon society and the environment. It has also reduced the long-term value and sustainability of those companies.
Benefit corporations have been developed for businesses that wish to make a profit while protecting the environment and making significant contributions to society. The management team of a benefit corporation must consider all stakeholders when making a decision, not just the shareholders.
Most aspects of running a benefit corporation are the same as a for-profit corporation. However, a benefit corporation has higher standards when it comes to its purpose, accountability and transparency:
In addition to making profit for shareholders, benefit corporation must make a commitment to create a general public benefit. A benefit corporation’s general public benefit could include operating in an environmentally sustainable way, providing training for young people, or donating certain % of all profits to charity. The creation of the general benefit should also be of benefit to the corporation in some way.
The directors of benefit corporations must always make decisions in the best interests of the business while considering how those decisions affect society and the environment. The business must be committed to providing long-term sustainable value for all stakeholders, including the shareholders, suppliers, customers, community, employees, and environment.
The business activities of benefit corporations must be performed with a high level of transparency. They must regularly produce reports detailing how they are achieving their business goals while having a positive impact on society and the environment.
Florida benefit corporations where introduced because Florida law did not have a provision for a profit-making corporation to consider a social purpose in addition to profit.
Why become a Florida benefit corporation?
There are many advantages to becoming a Florida benefit corporation, including:
Entrepreneurs can uphold the businesses mission while attracting investment
By registering the business as a benefit corporation, entrepreneurs can ensure their social and environmental goals remain at the core of the business. They can attract investment from outside sources without endangering those goals.
It allows you to improve the branding of your business
One of the key advantages of becoming a benefit corporation is in branding and marketing. Your business can use marketing strategies that emphasize the company’s socially conscious status. Highlighting the contributions that your business makes to social causes or the environment can attract more customers. Some companies that have used this strategy effectively include Etsy, Ben & Jerry’s, and Patagonia.
Limited legal liability
Registering your business as a benefit corporation will allow you to receive the same level of limited legal liability as a C corporation, S corporation or LLC.
It will improve your business’s reputation
Many people will consider your business to be more ethical if it is committed to protecting the environment and being socially responsible. They will also believe your business is innovative and a leader in the market. This can attract investors and customers.
Your business will find it easier to attract talent
Millennials will soon make up the majority of the workforce in the United States. Workers in this demographic tend to be more socially and environmentally conscious. They want to work for companies that are sustainable and make a significant contribution to the public good. They are more likely to be attracted to benefit corporations because of the general public benefit these companies create.
Happier employees, reduced staff turnover and better productivity
Most employees are happier when working for ethical businesses that are interested in resolving social and environmental problems. They will be more productive in the workplace and less likely to leave their position.
Shareholders like companies that are accountable
Shareholders like investing in companies that have a clear mission for which they are accountable. This can help your business attract investment capital.
The sharemarket likes innovative entrepreneurs
Investors love forward-thinking entrepreneurs like Elon Musk and Steve Jobs. Companies that take steps to improve social and environmental issues while turning a profit often receive additional goodwill.
The difference between benefit corporations and certified B corps
Benefit corporations and Certified B Corps have a great deal in common. Both structures have been developed for businesses interested in making a positive contribution to society. The main difference is that B Corp is a certification offered by a non-governmental organization named B Lab, while a Benefit Corporation is a legal entity created by the state. Other important similarities and differences include:
Directors of Benefit corporations and Certified B corps must consider the impact of business operations on all stakeholders.
Both entities must regularly publish public reports that show the social and environmental performance of the company as assessed by a third party standard.
A Certified B Corp must achieve a minimum score on its B Impact Assessment. It will also have to be re-certified every two years against an evolving standard. Benefit corporations are self-reporting.
Any business can apply to become a certified B corp, regardless of their state or country of incorporation. Benefit corporations are only available in certain states within the United States. At this point, benefit corporations can be created by companies based in 33 states and the District of Columbia. Businesses were able to form benefit corporations in Florida after the Florida Business Corporations Act, Part III (Fla. Stat. Ann. §§ 607.601 to- .613) became effective on July 1, 2014.
Certified B corps must pay B-Lab certification fees, which start at $500 per year, and is based upon the businesses revenue. Benefit corporations must pay state filing fees. In Florida, filing fees for a corporation are $87.50, with other fees for submitting filings and annual reports.
How do you become a Florida benefit corporation?
Starting a benefit corporation in Florida is very similar to start a C Corporation or S Corporation. The process includes the following steps:
1) Choosing a name for your corporation
Before filing any documents, you must establish a name for your benefit corporation. Your company’s name must be unique and distinguishable from all other entities filed with the Florida Department of State, Division of Corporations (DOC). If your name is similar to another corporation, you can obtain written permission from that business to use it. A corporations name is not considered distinguishable when its only difference is:
The symbol “&” or the word “and”
The use of a suffix
A definite/indefinite article
The plural, singular or possessive version of a word
An abbreviation of a root word
For example, you could not register a company with the name “Coca and Cola” or “Microsoft!”. Additionally, your company cannot have a name that sounds like a government agency or a registered charity.
It is important to test the availability and suitability of your businesses name well before filing articles of organization with the Florida Division of Corporations (DOC). This will help you avoid any delays in forming your benefit corporation.
If you intend to use the name of your business as a trademark, trade name, or domain name, searches should be conducted with the US Patent and Trademark Office before applying.
Once you have found a suitable name, you will need to go through the following steps:
Identifying who the organizer is The organizer is the person of business preparing and filing your articles of incorporation with the Florida Division of Corporations (DOC). Most businesses choose to use an experienced as their organizer, to ensure the document is correctly prepared.
The address details of the company’s principal office for articles of incorporation The company must have a principal address. This address doesn’t have to be in Florida.
The address of the company’s registered office This can be the same as your place of business. Important documents from the Florida Division of Corporations (DOC), IRS, and other government agencies will be sent to this address.
The registered agent of the corporation The corporation must continuously have a registered agent. They can either be an individual residing in Florida with the same address and the company’s registered office OR a foreign/domestic entity that is authorized to do business in the address assigned to the company’s registered office.
Whether your benefit corporation will have an indefinite duration By default, a corporation will have an indefinite duration, however, you may prefer that your benefit corporation only exist for a specific period of duration.
Will the business offer professional services? If the business delivers a professional service, additional statutory requirements might apply. Professional services cover any business that offers customized, knowledge-based services — including doctors, lawyers, and engineers.
How will the benefit corporation be managed? Thought should be given to the number of board members that will be initially appointed. Staff should be nominated for other key roles including the chief executive officer, chief financial officer, chief operating officer, and secretary.
Does the benefit corporation have majority/minority interests? How will ownership of the corporation be divided?
Articles of Incorporation
The articles of incorporation must be completed and submitted to the Florida Division of Corporations (DOC). The effective time and date can be specified on the filings — if left blank the DOC will provide a time. These documents can be submitted online or via mail.
Filing fees for new Florida corporations with a registered agent designation are $70.00, but there may be additional expenses depending on your requirements. If certified copies of filed articles are required, there is an additional $17 fee. A letter of acknowledgment is issued upon the filing of documents.
Benefit Corporation Bylaws
Any business forming a corporation must have a set of bylaws. Some of the items defined in the bylaws will include:
Statement of Purpose The statement of purpose explains why your company was formed. It will identify the products or services you supply, who your primary customers will be and what will make your company extraordinary. This component is very important for a benefit corporation because it will detail how your company intends to provide a general public benefit.
Members This section will detail the members of your corporation, their roles, and their voting rights. It will also explain how new members will be introduced, how voting rights work, how often the management team will meet and much more.
Board of directors Details of who will be on the board and how the board will function will also be included. Benefit corporations may need to assign a benefit director or benefit officer, who will ensure that the company continues to provide a general public benefit.
Directors standard of conduct The directors of benefit corporations must follow a standard of conduct. In Florida, the directors MUST consider the shareholders; employees and workforce of the corporation, its subsidiaries and suppliers; customers and suppliers as beneficiaries; community and societal factors; local and global environment; corporate interests; the ability of the corporation to accomplish its general public benefit purpose and each of its specific public benefit purposes (if any). Details of this obligation can be included in the corporate bylaws.
Shareholder’s meetings Details of how and when shareholder meetings will occur should also be included. This section can explain the quorum required to vote at these meetings and the order of business that will be followed.
Stock This section will explain how much stock will be issued, who will receive it, and how it can be transferred. Details of the voting rights and dividends associated with shares should also be mentioned. You may wish to include details regarding redemption rights, rights of first refusal, and anti-dilution rules.
Officers Officers usually include the President, Vice President, Chief Executive Officer (CEO), Chief Financial Officer (CFO), and Treasurer. You should specify who will fill these roles, what their remuneration is, and what their key responsibilities are.
Annual reporting requirements You may wish to specify who will be responsible annual reporting requirements, including the annual benefit report (see below).
Most businesses employ the services of an experienced lawyer to ensure this document adequately represents the interests of the owners of the company and other stakeholders.
What are the benefit corporation reporting requirements in Florida?
Benefit corporations have a higher level of accountability and transparency than other corporate entities. Every benefit corporation must produce an annual benefit report that informs the public about the businesses social and environmental performance.
This report will help to inform the directors of the company so they can better understand how well they are performing. The annual benefit report will also help shareholders understand how the company is performing and exercise their rights. Government authorities and judges may use the annual benefit report to determine if a company is meeting its statutory requirement to meet its public benefit purpose.
In Florida, the annual benefit report must include:
A narrative description of the ways the corporation pursued general public benefit and the extent to which the general public benefit was created, any circumstance that hindered the pursuit or creation of general or specific public benefit, the process and rationale for selecting or changing the third-party standard used to prepare the report.
The name of benefit director and benefit officer (if any)
The benefit director’s statement
A statement of any connection between the organization that established the third-party standard (or its directors, officers, holders of more than 5 percent of governance interests) and the corporation (or its directors, officers or holders of 5 percent or more of its shares).
If a benefit director resigned, refused to stand for reelection, or was removed, and the director furnished written correspondence to the 5 corporation concerning the circumstances, the correspondence must be included as an exhibit to the annual benefit report
The benefit report must be prepared in accordance with a third-party standard. This standard must be applied consistently with any previous application in prior annual benefit reports or is accompanied by an explanation for any inconsistent application or change from the immediate prior report. Businesses often turn to a lawyer for help when preparing this annual report also.
Thanks for reading How to Form a Florida Benefit Corporation. If you are interested in forming a Florida Corporation or Florida Benefit Corporation, contact FL Patel Law PLLC on (727) 279 5037.
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