Tax Law -- The Birth of a New Class of Corporation in California "Benefit Corporations"


When Governor Jerry Brown signed Assembly Bill 361 into law on October 9, 2011, California became the sixth state to recognize a new category of corporation known as “benefit corporations” or “B corporations.” (Maryland enacted the first B corporations statute in 2010.) The new California law is codified as Corporations Code section 14600 et seq.

Benefit corporations are for-profit corporations organized under California law. However, under the new law, for-profit corporations may adopt (in addition to one or more business purposes) purposes that have been historically pursued by nonprofit corporations. In other words, benefit corporations are business corporations that differ from traditional corporations in that they may set a goal to create public benefit while, at the same time, delivering economic returns to their investors. The new law provides legal protection to directors of this new class of corporations in pursuing what social entrepreneurs have termed a double bottom line-creating a beneficial social and environmental impact as well as financial returns to shareholders.

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