Maryland Benefit Corporation

Maryland Benefit Corporation

Maryland is the first state to legally recognize a new legal structure known as a benefit corporation. Vermont is considering similar legislation.

What is a Benefit Corporation?

The benefit corporation concept has some similarities to the L3C model but is geared toward corporations rather than LLCs. Like the L3C, benefit corporations pursue a mission that goes beyond making a profit for owners and investors.

Importantly, it also provides legal protection for board members that consider social and environmental issues when making decisions on behalf of the corporation.

Unlike the L3C concept, the benefit corporation legislation does not require social goals to outweigh a profit motive. Rather, it requires that the benefit corporation make a material positive impact on society and the environment as measured by a third-party standard.

Currently, the third party setting that standard is B Lab, a nonprofit organization in Berwyn, Pennsylvania, that runs a certification program for socially responsible businesses.

How a Benefit Corporation Can Make a Positive Impact through a Wide Range of Social Goals

A benefit corporation can make a positive impact by:

  • Providing individuals or communities with beneficial products or services;
  • Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business;
  • Preserving the environment;
  • Improving human health;
  • Promoting the arts, sciences, or advancement of knowledge;
  • Increasing the flow of capital to entities with a public benefit purpose; or
  • The accomplishment of any other particular benefit for society or the environment.

By embedding a social purpose into the statutory framework and authorizing corporate directors to take certain non-economic issues into consideration when making business decisions, the B corporation statute gives the shareholders and directors of a corporation the ability to legally consider social goals without violating fiduciary duties to the company’s owners and investors.

This is an exciting development that makes good business sense for the numerous companies that are already making socially responsible decisions and now, in Maryland at least, will be able to gain clear legal protection for doing so.

Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations nationwide. Ellis also advises donors with regard to major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.

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