Benefit Entity Legislative Landscape as of August 2017
by Peter Smith
I was recently privileged with the opportunity to give a continuing legal education lecture with LawPro CLE on the topic of benefit entities, specifically the Benefit Corporation, the Social Purpose Corporation, and the L3C (or low profit limited liability company). A small portion of that lecture reviewed benefit entities across the 50 states, and there was some explanation about the differences among states and their benefit entities. I’ve included a map of the 50-state survey, and I thought that I would share that map. So here it is!
Three interesting points from the map data. First, the benefit corporation is far and away the most popular benefit entity type among the state jurisdictions. For a number of reasons, the benefit corporation is the most robust of the corporation types: the statutory language (in most states) automatically requires evaluation of stakeholder mission against a third-party standard. In contrast, the flexible or social purpose corporate entity types do not require, by statute, the higher third-party standard that the Benefit Corporation requires. (Some legal comparisons between the social purpose corporation and benefit corporation here).
Second, the L3C has NOT gained any additional states since the last time I did this research (February of 2014). In fact, North Carolina abolished the L3C structure in January 2014. This means that since 2012, additional jurisdictions have not adopted the L3C, and one state abolished it.
Finally, it is worth noting that only 13 states have no benefit entity types at all. Thus, the state of the union is such that NOT having a benefit entity is the minority. Enjoy the map!
The article provided above is for general information purposes only and should not be relied on as specific legal advice. This article does not form an attorney-client relationship. If you have any questions about this article, please feel free to contact Peter J. Smith at firstname.lastname@example.org
June 30, 2017