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Business, Passion, and the Greater Good: Using Benefit Corporations for Profit and Purpose

By Keith C. Collins, Esq. of Shustak Reynolds & Partners, P.C. posted on Wednesday, February 10, 2021.

You are forming a corporation, great! Corporations offer many protections and benefits for entrepreneurs. But corporations are also closely regulated and subject to many restrictions. So, what happens when you want to form a corporation that is based on your passion, and your passion includes more than just profit? You may need a special type of corporation.

A simplistic, and somewhat cynical view of corporations is that they function only to create shareholder wealth. You start a corporation, shareholders invest through the purchase of shares, and, ideally, everyone gets rich. That perspective is reinforced by regulations that require a company to make decisions based on the best interests of shareholders and that interest is often profit. But what happens when you start a corporation with a purpose bigger than profit? For entrepreneurs that want profit with purpose there is a special type of corporation, the benefit corporation.

A benefit corporation differs from a traditional corporation in several significant ways. Notably, a benefit corporation is specifically designed to allow a company to pursue a profit and a public benefit. Investors purchase shares in a benefit corporation with the knowledge that the corporation will consider its stated public benefit when making corporate decisions. Thus, giving the corporation the freedom to enjoy the benefits of a profitable company, while also providing a public good. This unique corporate structure protects the corporation from derivative lawsuits, encourages investment from individuals and groups aligned with the corporation’s public benefit, and provides a unique way to generate revenue while giving back to the community.

If you have a vision for a corporation driven by profit and purpose, contact Shustak Reynolds and Partners for help organizing a corporation appropriate for your specific circumstances.

Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes. 
We represent many broker-dealers, registered representatives, investment advisors, investors and businesses. 
Attorney Keith C. Collins can be reached in the firm’s San Diego office at (619) 696-9500. 

 

 

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