Benefit Corporation Law Should Be Uniform in the United States

Image credit B Lab
Image credit B Lab

By Rebecca Hamburg 

Benefit corporations, although still new, are a rising form of organizations throughout the United States that fall under the “fourth sector.” In the United States, a benefit corporation is defined as a for-profit entity that also focuses on social benefit, or “doing good.” Doing good can mean a variety of things: from following ethical societal guidelines, to workplace environmental standards, to paid maternal leave. The aim of a benefit corporation is to have a positive impact on society, employees, the general community and the environment.

April of 2010 marked the passing of the first benefit corporation legislation in the United States, in Maryland. Since then, 30 states and the District of Columbia have passed their own individual laws enacting benefit corporations.

Although progress is substantial, it can be improved; right now, each state has its own individual rules, requirements and guidelines for passing and enacting a benefit corporation. Benefit corporations would, in fact, be much more successful if they were streamlined – the United States should have a uniform set of regulations for all benefit corporations within this country.

Both new companies and existing companies can become benefit corporations by incorporating as a benefit corp anywhere state legislation has been passed, and/or by amending their existing government documents. Many – though not all – states thus far follow the guidelines to becoming a benefit corporation prepared by the law office of Drinker Biddle & Reath, LLP. Additionally, the B Lab – a separate entity that certifies companies as B Corporations (meeting certain ethical and environmental guidelines) has a template for becoming a benefit corporation as well. But these templates are neither streamlined nor mandatory; states do not necessarily have to follow these pre-set rules. It’d be much more productive if there was a federal law for becoming a benefit corporation that all states had to adhere to. This would allow for communication across state lines and easier ability for said companies to expand.

How many companies and organizations can you think of that have offices in other cities, other states? Does the company you work for have more than one office? If the answer is yes, then your company’s ability to become a benefit corporation just became much more difficult. The company would have to adhere to both the headquartered state’s laws and the laws in all additional states as well. More red tape, more paperwork, greater difficulty becoming a benefit corporation.

This is why there should be uniform, federally-recognized laws and guidelines to becoming a benefit corporation – the same rules and regulations for each state. Not only would it improve the already existing system, but it also would act as an innovative platform for the entire “fourth sector” movement.

Image credit: B Lab, benefitcorp.net

Rebecca Hamburg is a graduate student at The George Washington University Trachtenberg School of Public Policy and Public Administration. She is earning a certificate in Nonprofit Management, graduating this spring. Within her degree, she is most interested in the innovative and new “fourth sector” organizations that are emerging; specifically, Benefit Corporations, B Corps, and L3C’s (although she still does not fully understand what those are). She currently works at a Political Media Consulting firm in Washington DC, whose clients are frequently nonprofit organizations; she hopes/intends to apply her academic learning to the real world.

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