Corporations and Their Lawyers “Doing Good”: What You Need to Know About “Special Purpose” and “Benefit” Corporations

May 23, 2012

Changing times bring about new ways of looking at traditional business practices and they also require that you keep abreast of new developments that your clients will want to ask you about.  One thing that is starting to sweep across the country is the recognition that the “corporation” that you learned about in law school, with its emphasis on creating economic value for shareholders even it that sometimes means treading on the interests of other stakeholders such as employees and members of the community where the corporation is doing business, may not be suited for many of the activities that interest your clients.

The response has been the development and recognition of a new legal model for a for-profit corporation that allows directors and officers to expand beyond shareholder value to actively pursuing other socially responsible goals such as environmental stability, improving health or promoting opportunity for individuals or communities beyond the creation of jobs in the ordinary course of business.  A recent post on the Start Up Law Blog, a useful resource for a number of issues relating to representation of new businesses, highlighted Washington’s decision to recognize a “social purpose corporation”. Similar legislation has been adopted in a number of other states and these corporations are sometimes referred to as B-Corporations or L3C’s.

Your clients will want to know more about the interesting alternative and one resources you can turn to is the detailed discussion of “flexible purpose” and “benefit” corporations in California that appears in California Transactions Forms—Business Entities, or if you’re already a WESTLAW subscriber, just go to “CTF-BE” and start with §1:5.  Also, with our compliments, here’s a sample of a previous edition of Business Counselor Update (WESTLAW: BTS-BCU) that summarizes the California legislation.