Does a Public Benefit Corporation structure seem too complicated or daunting for your business? Then consider the Public Benefit LLC as an alternative. By registering as a Delaware Public Benefit LLC, and obtaining a foreign filing certificate in your home state, you can brand yourself a “benefit company” with the operational simplicity of a limited liability company.
I’ve previously written about Public Benefit Corporations and how they differ from Certified B Corps.
There are many reasons that a for-profit entity would want to be recognized formally by its public benefit, including:
- Legal governance requirements for B Corp certification*;
- Preservation of founder principles;
- Concerns about shareholder primacy; and/or,
- Branding an ethos to potential customers, clients, and employees.
For many startups, local businesses, and owners preferring pass-through tax treatment, a benefit corporation is not practical. Fortunately, there is an alternative: the Public Benefit LLC, or Benefit LLC for short. A Benefit LLC combines the stakeholder framework of a benefit corporation with the simplicity of a limited liability company. Key features of a Delaware Benefit LLC include:
- The members/managers of the LLC balance financial interests of its members with the interests of materially impacted stakeholders as well as the public benefit stated in the LLC’s certificate of formation;
- The members/managers must walk-the-walk, i.e. must periodically provide to its interest holders statements summarizing how the LLC is promoting its public benefit; and,
- The stated public benefit must be accurately capture the LLC’s public purpose or beneficiary.
Examples of public benefit statements include:
An AgTech Company:
Pursuant to §§ 18-1202(a)-(b) of the Act, the LLC shall have a positive economic effect on improving the environmental sustainability of agricultural production systems through the application of precision and data-driven management practices, particularly by efficient use of water, nutrient, and chemicals, and the LLC shall have a positive effect on sustaining the viability of rural communities through environmental protection, and job creation.
A Healthcare Consultant:
Pursuant to §§ 18-1202(a)-(b) of the Act, the LLC shall provide systemic, imaginative, and innovative customer valued growth strategies and solutions to healthcare systems and community providers. The LLC shall work to improve the conditions that lead to measurable increases in community well-being and individual access to basic care. The LLC shall strive to strengthen local economic vibrancy and competitiveness.
An Artisan Distributor:
Pursuant to §§ 18-1202(a)-(b) of the Act, the LLC shall have a positive effect economic effect upon people of western African, particularly artisans of Liberia, and the LLC shall have a cultural and educational positive effect upon people of the United States, particularly people interested in learning about and economically supporting Liberians through commercial trade.
Unfortunately, there aren’t many states that have adopted the Benefit LLC model.
States promoting the Benefit LLC model include Delaware, Kansas, Maryland, Oregon, Pennsylvania, and Utah. Notably, many southern states are just now adopting watered-down versions of Benefit Corporation statutes, and are unlikely to consider Benefit LLC’s in the near future despite the proliferation of small and mission-oriented businesses.
(In a 2018 letter from Tennessee Secretary of State Tre Hargett, I was informed that I was the first “customer” who had inquired about adopting a Benefit LLC statute, and that the estimated $75,000 price tag necessary for its adoption in Tennessee would not be justifiable in light of the estimated $5,000 that would be generated in yearly filing fees. Consequently, I’ve steered many Tennessee clients towards Delaware formation.)
Fortunately, most states offer an easy option to obtain a certificate of authority for operating a company first registered outside the state. Consequently, you can register as a Benefit LLC in a state like Delaware, and obtain a certificate of authority within the state of your principal activities. By doing so, you lock in your principles and can freely proclaim that you are a “Benefit Company,” “Benefit LLC,” or “Public Benefit Company” to your target audience.
* The Mission Lock Question (10 points) on the B Corporation Impact Assessment asks: “As an independent or publicly-owned business, [have you] amended corporate governing documents or adopted a legal entity that requires consideration of all stakeholders in its decision-making (e.g. benefit corporation, completed B Corp legal amendment).”
My name is Kevin Christopher. I’m the founder of Rockridge®, a B Corp technology law firm, as well as B Tennessee, a nonprofit advancing uptake of B Corp and benefit corporation frameworks. I’m also pro bono counsel for B Academics, a collection of researchers studying behavioral, market, political, and other metrics of social enterprises. In my professional career I’ve evolved from a neural implant patent nerd to an unabashed social enterprise advocate. Read more about me and my practice in the links that follow.
About Kevin Christopher
Kevin Christopher is the founder and principal of Rockridge Venture Law®, a B Corp Best For The World and Real Leaders Top 150 impact company. Kevin is a Berkeley Form + Fund Fellow, Yale 2050 Fellow, SuperLawyer, and Conscious Company Magazine Top Business Leader. Kevin is a registered patent attorney with practice areas including: patent and trademark prosecution, licensing and litigation; corporate law, with an emphasis on benefit corporations, socially responsible businesses and high-growth emergent companies; government contracts, with an emphasis on innovation funding; corporate and investor financing; and, technology commercialization. Kevin is also an entrepreneur, having co-founded companies in biotech, renewables, and consumer product industries, all active and growing. Kevin mentors entrepreneurs as program advisor with Bethesda Green Hub, First Flight Venture Center, Nashville Entrepreneur Center, University of California Venture Catalyst, and Yale Tsai CITY. With a background in public-private partnerships, Kevin is also a National Institutes of Health (NIH) RadX faculty member, and National Science Foundation (NSF) Center for Bioplastics and Biocomposites program evaluator.
RVL recommended reading by Kevin:
Plainspeak IP: IP Fundamentalist of Fundamentals
Plainspeak IP: Social Media Influencers
Grading Georgia’s Public Benefit Corporation Law
Improving Your Trademark EQ: How to Choose a RAD Trademark
What is a Patent? Why do I Need One? How can I Get One? What’s it Gonna Cost Me?
Common Mistakes Made by Entrepreneurs
SECsy for the Sharks: Tips on Creating and Delivering Startup Pitches that Meet Federal Regulatory Requirements
Rockridge Venture Law® is a certified B Corp law firm embracing the mantra of technology lawyers for good. Rockridge® services include corporate, intellectual property, litigation, M&A, privacy, technology, and venture capital law. Rockridge has been recognized as a B Corp Best for the World and Real Leaders Top 150 Impact Company, and has been featured by Conscious Company Magazine, Forbes, and other top media focused on industry leaders in impact and innovation.
The Rockridge team has worked with Grammy winners, Nobel Prize winners, and world champion athletes to create and monetize distinctive intellectual property assets. Rockridge clients include founders, investors, and multinationals scaling disruptive technologies and iconic brands. Rockridge is headquartered in Tennessee, with satellite offices in Durham, New Haven, and New York.
We’re Building Today’s Company for Tomorrow’s Economy® by leading clients through the dizzying array of information controls, by helping them to develop and monetize proprietary assets, and by enabling their impactful products, programs, and principles.
See case studies on how we’ve helped transformative companies at Rockridge Case Studies.