Benefit Corporations: New Organization for Entrepreneurs?
Many Connecticut companies give generously and enthusiastically to charitable and social causes. The business community has proven time and again that it considers its social responsibilities as important as achieving profitability.
While businesses and entrepreneurs often seek to make investments that produce both financial and social benefits, a recent national movement is working to ensure that social missions are protected under the law.
The concept, known as “benefit corporations” or “B-Corps,” allows entrepreneurs to invest in companies whose social mission statements are afforded certain protections.
Current models of nonprofit corporations and limited liability companies are used to accomplish such social-mission focused operations, but many entrepreneurs have asked states to allow for the creation of a new corporate organization–the B-Corp.
Under a proposal in Connecticut this year (SB 23), organizers could elect to form B-Corps, just as they now may elect to form C-Corps, LLCs and other business organizations.
B-Corps would receive no benefit not otherwise afforded to C-Corps. They would however be required to take on new fiduciary duties aimed at maintaining its social mission.
This means that shareholders of a B-Corp, if they felt the organization was ignoring its social mission, could ask the courts to force the issue.
With such strict rules governing the actions of B-Corps, it is unclear just how many will be formed. But, with the strong interest of entrepreneurs here, Connecticut could become a preferred destination of organization for these companies.
Since this would create a new form of business organization in Connecticut, CBIA is carefully proceeding to determine its merits and our position on proposed legislation.
For more information, contact Eric George at firstname.lastname@example.org.
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