Entrepreneurs weighing the benefits of S corporations, C corporations and other entities can now add another business structure to the mix if they decide to undergo business incorporation in Maryland.
State officials have become the first to legally create a new corporate form known as a “benefit corporation,” Business Week reports. This formal entity will allow entrepreneurs to include social missions in their corporate charters.
The law lets business owners commit for-profit companies to a specific public good. It requires them to report contributions to that cause and submit to auditing of their impact. The status also allows entrepreneurs to consider a wide range of outside stakeholders in business decisions – a liability with most entities.
The model is based on a proposal from the nonprofit B-Lab. One of B-Lab’s cofounders, Jay Coen Gilbert, told the source he hopes this legal designation will make it possible for philanthropic entrepreneurs to start a corporation and find new capital for social ventures from investors.
“I think [social ventures are] becoming increasingly not only acceptable but sought after by mainstream investors,” Gilbert says.
While Maryland is the first to pass this kind of legislation, the Associated Press reports it is in consideration in other states. Entrepreneurs in Vermont, North Carolina, Pennsylvania, Colorado and Washington may soon be able to benefit from this type of corporation soon.
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