Benefit companies: They're (almost) here

Duncan Delano is an attorney with Tonkon Torp LLP's environmental and natural resources practice group.

Last week, Gov. John Kitzhaber signed into law House Bill 2296, which creates a new form of business entity called the “benefit company.”

A benefit company is a business that, in addition to its principal purpose, has another purpose to provide a benefit to the community — that is, a “material positive impact on society and the environment.” Thus, a benefit company is a business that focuses on both profit and sustainability.

Under the new law, which becomes effective Jan. 1, a benefit company can be organized and taxed as a limited liability company, an S corporation or a C corporation. But in its business registration documents, a benefit company commits to sustainable practices in all its operations.

So how exactly does it do that? What makes a benefit company different than a traditional business?

Three things: purpose, transparency and accountability.

Benefit Purpose

In a traditional company, the directors and officers have a fiduciary duty to make decisions based primarily on the best financial interest of the company’s shareholders or members. But in a benefit company, the directors and officers are not only allowed to also consider sustainability issues in decision-making, they must consider the company’s effect on social and environmental interests when making business decisions. A benefit company’s purpose is to pursue the triple bottom line.

While a benefit company has this added purpose of providing a general public benefit, it may also choose a specific public benefit as an additional purpose. For example, it might have an additional specific purpose to source locally or to have carbon neutral operations.

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