Profit and Purpose: Two New Types of California Corporation that Promote Social as well as Financial Benefits

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Effective January 1, 2012, California companies are able to incorporate under two new forms of corporation: the Benefit Corporation and the Flexible Purpose Corporation. These new corporate forms facilitate companies’ efforts to advance social welfare and environmental sustainability objectives while creating profits and value for their shareholders.

The primary purposes of traditional for-profit corporations are to promote long-term value growth and maximize shareholder profit. Other purposes, such as social benefit, should not conflict with these primary goals. Although some for-profit corporations are currently able to devote resources to advancing social benefit goals, these efforts must be balanced with the corporate directors’ mandate of maximizing growth and profit.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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