Brandon Mantilla – Although businesses traditionally prioritize maximizing profits for shareholders, today’s businesses may wish to further social goals at the expense of their bottom lines. Florida recognized this trend and appealed to socially conscious businesses in 2014 when it amended the Business Corporations Act to include new business structures. Following the amendment, companies may now register as Social Purpose Corporations (“SP Corp”) or Benefit Corporations (“B Corp”). Today, young adults care more about corporate social responsibility than ever, with 86 percent of millennials responding in a survey that business success should be measured in terms of more than just financial performance. Given that millennials support social entrepreneurship—a business approach which develops solutions to social, cultural, and environmental issues—companies might consider registering as a SP Corp or B Corp.
A SP Corp must identify an intended “public benefit” in its articles of incorporation. Florida Statutes section 607.502 defines a public benefit as “a positive effect, or the minimization of negative effects, taken as a whole, on the environment or on one or more categories of persons or entities, other than shareholders in their capacity as shareholders, or an artistic, charitable, economic, educational, cultural, literary, religious, social, ecological, or scientific nature, from business and operations of a social purpose corporation.” SP Corps are accountable to both their shareholders andstated public purpose. As a result, SP Corps are afforded more protections from shareholder lawsuits than traditional corporations, as long as they are furthering their “public benefit” objectives. Examples of SP Corp purposes include helping low-income communities, restoring the environment, improving human health, and promoting the arts and sciences.
A B Corp is similar in that it must specify an intended public benefit in its articles of incorporation, but they must also have a general public benefit, or “material, positive effect on society and the environment, taken as a whole, as assessed using a third-party standard by which is attributable to the business and operations of a benefit corporation.” B Corp executives are accountable to their “general public benefit” and shareholders. B Corps have the same objectives as SP Corps—i.e. helping low-income communities, restoring the environment, etc.—but have broader responsibilities. For example, B Corp must take into account how any action taken by the corporation would affect the community at large, while SP Corps are not required to take this into account. Generally, B Corps are focused on broadly promoting societal welfare while SP Corps focus on narrow issues.
The demand for and interest in participating in socially conscious business is palpable, with 11 percent of working adults in the United States being involved in social entrepreneurism, either at the startup or operational stage, according to a 2016 Global Entrepreneurship Monitor study by Babson College. Becoming an SP Corp or a B Corp can provide great benefits, such as an enhanced reputation in the eyes of the public, limitations on shareholder lawsuits, and an increased ability to recruit talent. As more companies become aware of these potential benefits, Florida is sure to see a rise in SP Corps and B Corps in the near future.