Benefit Corporations: It’s That Easy

Many entrepreneurs are interested in forming benefit corporations.   But because it’s a new idea, and involves legal issues, that may mean talking to a lawyer.  As we all know, talking to a lawyer about a new and interesting issue can be costly.  I know– before coming to B Lab, I practiced law for 25 years.  But the truth is, forming a benefit corporation should not be more complex or time-consuming than forming a traditional corporation.

Benefit corporation governance acknowledges that all stakeholders, and not just shareholders, should be the central to a corporation’s purpose.  The fact is, this model is a better fit for many new enterprises than is traditional corporation law, which emphasizes shareholder return above all else.  Thus, it makes no sense for the barriers to forming a benefit corporation to be any greater than those for starting a traditional corporation.

But those barriers are coming down.  This article by Fast Company’s Ben Schiller highlights a new turnkey solution form Clerky, a legal document provider, that takes a benefit corporation from its creation through hiring employees, issuing stock option plans and documenting capital raises.  The basic fee for creating a benefit corporation is $99.

In addition to the ease of formation, there are now many free resources available that benefit corporations can take advantage of. B Lab’s benefit corporation website has information for investors, businesses and lawyers.  My website also has a resource page for benefit corporations.

There are real advantages to starting life as a benefit corporation.  Benefit corporation status helps to motivate and attract your workforce, and perhaps distinguish you from more established enterprises, and has a great reputation with customers and suppliers. Moreover, investors have become quite comfortable investing in benefit corporations, especially following Laureate Education’s successful IPO.  B Lab has been able to track well over a billion dollars in benefit corporation investments involving 28 different benefit corporations.  In contrast, waiting until “later” to convert into a benefit corporation can create tension and confusion when that day actually comes, as investors and others may be leery about changing corporate governance midstream, especially if things have been going well.

The Fast Company article details how serial entrepreneur Anand Kulkarni has used Clerky to create a benefit corporation for his latest project, which is part of Y Combinator’s most recent accelerator class– demonstrating that the benefit corporation is moving into the fast lane of Silicon Valley start-ups.  The bottom line is that creating a benefit corporation is no more difficult than creating a traditional corporation, but can yield substantial advantages, particularly if you want your business to treat workers, customers and the community as if they were just as important as shareholders.

Create a Benefit Corp with Clerky

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