As of January 2, 2014, Oregon allows a new corporation or limited liability company to begin life as a “benefit company.” Also, existing entities may convert to a benefit company. The new law HB 2296 gives a benefit company legal protection to create value for society — not just its shareholders. Benefit company management may safely balance its fiduciary duty to maximize profit and asset value for owners in decision-making with the interests of the greater society and of the environment. At the incorporation or conversion of a corporation or limited liability company as a benefit company, the entity must declare its commitment to creating a general public benefit.
A general public benefit is a “material, positive impact on society and the environment, taken as a whole, as assessed against a third-party standard, from the business and operation of a benefit company.” This declaration allows a company to make decisions that would otherwise violate a fiduciary duty in order to advance the positive values of the company’s declared general public benefit. In addition, benefit companies are transparent in being held accountable to advancing their declared values. Benefit companies must publish yearly a report comparing its activity in promoting its value against a third-party standard. Oregon’s law is just the second out of the 19 states and the District of Columbia to allow for benefit entities.
A benefit company may be a good fit for your business. The balance between generating profits and furthering positive values allows a successful business to a broader positive effect on its workforce and on society as a whole. If you have a vision for your corporation or limited liability company that extends beyond simple profits, incorporation as or conversion to a benefit company may be the answer.