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Benefit corporations: businesses with social purposes

Registering a company as a “benefit corporation” gives a for-profit company official recognition “as a business that has a purpose,” says Gary Skulnik, CEO of Neighborhood Sun, a Bethesda startup that fosters “community solar” projects.

Perry Hooks, president of Hooks Book Events, another benefit corporation in Bethesda, said, “Business can be for good. Business should be part of the solution.”

Rep. Jamie Raskin (D-8), back in 2010 when he was a state senator, led the effort to add benefit corporations to Maryland statutes, said Skulnik. He added that Maryland was among the first states to have such a law, and the first to allow limited liability companies to designate themselves as benefit LLCs.

The state process for registering as a benefit corporation is quite simple, said Corbett Webb, press officer for the state Department of Assessments and Taxation.  A newly-filed corporation or LLC can include a statement in its charter choosing to be a benefit corporation, and existing entities may amend their charters to add such statements, he noted.

SDAT does not regulate benefit corporations or LLCs any differently than other entities, Webb said. There is no annual check on whether a benefit entity performs the benefit stated in its charter, he noted.

If the board members of a benefit corporation or LLC decide to withdraw their “election” as a benefit entity, they can file an amendment with SDAT, Webb added.

Unlike not-for-profit entities, benefit corporations and LLCs have no tax advantages, Skulnik said.

For benefit corporations that want public certification for the good works they do, he continued, they can go through the process with B Lab (bcorporation.net), based in the Philadelphia area, with offices in New York, San Francisco and Denver.

It is a substantial process “to prove that you’re doing what you say,” Skulnik said. You must file a detailed application, and submit to and pay for a third party audit of your company’s beneficial functions. The audit also examines whether the firm operates in a transparent manner, and treats the environment, community and workers properly. And, he added, the audit is annual.

“Unless you have certification, it’s all talk,” he asserted.

Hooks, on the other hand, found the paperwork of the “B-corp” process too burdensome and expensive, and decided to stick with the state registration and her own commitment to continue spreading book and author contacts and events to book-disadvantaged groups.

The B-corp process “wasn’t producing anything” for such groups or her company, she said. She is the only employee of her company, which hires contractors to produce specific events. HBE holds book events and discussions for a variety of corporate and governmental clients, and “tithes some revenue” to offer such events to groups underserved by books, such as students in lower-income neighborhoods and wounded warriors in military and veterans hospitals, she explained.

Both Hooks and Skulnik have found some limited business advantages from their benefit designations. Skulnik said the benefit statement in the corporate charter means Neighborhood Sun has the flexibility to take actions that are not profit-maximizing, though consistent with producing a public benefit.

More importantly, he said, his company was able to raise $390,000 in seed equity from investors last November. The consistency between its fully-certified B-corp status and its public-oriented purpose of spreading solar energy benefits to communities in which solar would not otherwise be available, actually helped the fundraising, he added.

Hooks said that when competing against other book-event producers whose prices were similar to hers, she was able to contend, “If the prices are the same, why not work with us?” In some instances, she attracted more business that way. Also, she added, authors enjoy doing presentations to disadvantaged audiences.

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Last modified onSunday, 08 October 2017 16:23
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