It’s Not “Just Good Business” Anymore – It’s Better Business.

“It’s just good business” can have such a negative meaning. The idea that profit should outweigh all other business considerations—a fact the law not only recognizes, but protects—can be distasteful to some consumers and young professionals who want to be a part of something more than just growing the bottom line. Many want to be a part of something greater that publicly is committed to having a positive impact on our communities and the world around us.

And now they can.

Effective January 1, 2016, Indiana will become the 28th state to recognize a new type of business organization/entity—the benefit corporation. A benefit corporation is a for-profit entity formally and legally committed to benefitting society and the environment as well as making a profit. This creates a triple bottom line: people, planet, profit.

What makes benefit corporations so unique? Under the new law, the founders of a benefit corporation incorporate their social mission directly into the company’s founding documents. This is because the purpose of a benefit corporation is to create a “general public benefit.” Consequently, unlike traditional for-profit entities where the general expectation is that they will maximize shareholder value, a benefit corporation must consider other factors such as employees, the environment, and societal concerns in order to accomplish that purpose and its mission.

These required additional considerations provide protection for a benefit corporation’s social goals. The creation of a “general public benefit” is the foundation of the law establishing benefit corporations. Quite simply, a benefit corporation exists to carry out its mission, and that mission cannot simply be abandoned in favor of larger profits. The law requires that the mission be pursued. This not only allows the founders’ mission to be integrated into the organization’s founding documents, but allows for the protection of that mission over time.

The benefit corporation structure can provide the means to fund a company’s social mission as well. Quite often, funding social and environmental issues can be difficult since stakeholders rarely see a return on investment. Yet by tying a social mission together with a for-profit enterprise, some investors may be more likely to contribute capital. Further, more and more investors are engaging in socially responsible investing (SRI) and designing portfolios around triple bottom line companies. Thus, benefit corporations may have a competitive advantage in the capital market, attracting investors other for-profits are unable to.

Simply, whether as consumers or business entrepreneurs, we just might be able to have our cake, and eat it too.

About Sarah M. Studzinski

Sarah M. Studzinski is an associate at Bose McKinney & Evans LLP. She concentrates her practice in the Business Services, Tax and Real Estate Groups. Prior to joining Bose McKinney & Evans, Sarah was a research assistant for Professor Mark Janis at the Indiana University Maurer School of Law. Sarah earned her bachelor’s degree in theatre and communications, with highest honors, from Purdue University. She earned her J.D. from the Indiana University Maurer School of Law – Bloomington, where she graduated magna cum laude. She is licensed to practice in Indiana.
This entry was posted in Indiana Business Corporation Law and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s