Photo by Ray Bilcliff
Why We’re Writing a Guide to Utah Benefit Corporations:
- We’re new to Utah! With roots in Tennessee, we’ve saddled up and expanded west, practicing from Kiln SLC.
- Rockridge supports B Local communities through the country and looks to provide helpful business and legal resources for their members.
- It’s easy to confuse benefit corporation (legal) and B Corp (business) requirements, and this guide helps to break down the legal requirements specifically.
- Each state’s benefit corporation laws vary in important ways, and business lawyers not familiar with these nuances can steer companies in wrong directions.
Rockridge® is a 4x Best For The World B Corp, designed to work with innovative and impact-oriented companies. See our contact page for ways to connect to learn more about our services and how we can help your company launch and scale.
Fundamentals of Utah Benefit Corporations
B Corps aren’t Benefit Corporations (necessarily) – Certified B Corps are companies audited by the nonprofit B Lab and validated to be good corporate citizens with triple bottom line business models. They get to brand themselves with the B Corp logo, similar to the way buildings can certify as LEED and chocolatiers as Fair Trade. As part of the B Corp certification process, B Lab requires companies that are legally structured as corporations to convert to Public Benefit Corporations. LLCs and even sole proprietors can also become Certified B Corps, though they don’t necessarily have to convert to a Benefit Corporation to become a B Corp. You can also realize the many advantages of a Utah Benefit Corporation legal structure even if you never intend to certify with B Lab as a B Corp business. Read more about how B Corps and Benefit Corporations are related here.
Utah’s Pioneering Spirit in Business – The Utah Benefit Corporation is blazing trails, firmly rooted in the unique landscape of state law, much like the majestic expanse of the Great Salt Lake, the awe-inspiring arches of the national park, and the vastness of the Bonneville Salt Flats. Navigating this terrain means aligning with Utah’s guidelines, especially when it comes to crafting your annual benefit reports and ticking off the boxes of operational essentials. Stray from the path by failing to observe Utah-specific statutory requirements and you might just find yourself in a desert of legal protections, mirroring the stark Bonneville flats. Keep your corporate compass set to Utah’s statutes to avoid any disputes and keep your business journey as smooth as a salt flat racer.
Fry Sauce and Fry Sauce to the IRS – Your Utah Benefit Corporation is treated as a typical corporation for tax purposes. There are no magic tax breaks here, but your accountant can guide you on what impact expenses may be deductible to a Benefit Corporation that otherwise aren’t connected to the purpose of a standard corporation.
No hidden slot canyons here – Utah Benefit Corporations must be transparent in periodically highlighting what they are doing to further the communities and/or public benefits they serve as expressed in their articles, bylaws, and other governing docs. You can’t just talk it; you’ve got to actually walk it. Utah Benefit Corporations must take into consideration numerous stakeholders when making business decisions. Utah Benefit Corporations must also issue public annual benefit reports and provide them to anyone who requests a copy. The public has to know what you’re all about and what you’re working with.
Statutory Sections that Matter for Utah Benefit Corporations
Utah Code Ann. § 16-10b-101 et seq.
A selection of requirements that prospective Benefit Corporations should consider:
Notice. Chapter 10b, the “Benefit Corporation Act” was added to the Utah Code 2014. Under the Act, the prospective Benefit Corporation’s articles must explicitly state that the corporation is a Benefit Corporation. The Benefit Corporation must have a general public benefit, meaning “a material positive impact on society and the environment” taken as a whole; assessed against a third-party standard; and from the business of a benefit corporation. § 16-10b-103(9). The corporation must also have a specific public purpose per § 16-10b-201(2), which may include serving low-income or underserved individuals or communities, preserving the environment, improving human health, promoting the sciences, and more, including the catchall of “conferring any other particular benefit on society or the environment.”
Conversion. For a corporation to convert into a Benefit Corporation by amending its articles, the amendment must be adopted in accordance with the procedures set forth in § 16-10a-202, and the amendment must be approved by a vote cast to at least two-thirds of shareholders entitled to vote. The termination of a benefit status requires the same vote, and the articles of incorporation must be amended to delete the provision required by § 16-10f-104, i.e., that the corporation states its Benefit Corporation status.
Operations. Directors of a Utah Benefit Corporation must consider not only shareholders, but also employees, suppliers, customers, the community and societal factors, the local and global environment, and the short and long-term interest of the corporation in performing their duties. Unless the benefit corporation’s articles explicitly state its intention to provide priority to certain interests, directors are not obligated to give priority to a particular stakeholder. Utah’s legislation also does not prohibit priority from being given to a particular holder.
Transparency and Compliance. A Utah Benefit Corporation must issue an annual report demonstrating, among other things, a valuation of the business’s overall social and environmental performance against a qualified third-party standard. The third-party standard, defined in § 16-10b-103(16), must be specified in the articles of incorporation, the bylaws, or otherwise adopted by the board of directors. The standard must be applied consistently to anticipated and prior benefit reports, and explain itself in the instance of any inconsistencies. Additionally, the entity must post its benefit reports on a publicly accessible portion of its website. If the corporation does not have a website, then the report must be readily available to anybody who requests a copy. The compensation paid to directors and financial or proprietary information in the benefit report may be omitted as posted.
Rockridge® Practical Observations on Utah Benefit Corporation Laws
Utah’s Benefit Corporation legislation is now a decade old ten years old and to date has retained all of its substantive language. Let’s compare that language to the Public Benefit Corporations subchapter in the Delaware General Corporation Law (DGCL), which is considered a standard for of benefit corporation legislation. Generally speaking, Utah’s Benefit Corporation legislation is comparable to the DGCL and even stronger in some areas.
The DGCL’s definition of public benefit is more detailed than Utah’s above, defining it as “a positive effect . . . on 1 or more categories of persons, entities, communities or interests . . . including, but not limited to, effects of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature.” Even so, there is not much of a functional difference between them. Utah also matches the DGCL by requiring that the benefit corporation identify one or more specific public benefit purposes in addition to the general benefit. When it comes to enforcement, the Utah and DGCL both stipulate that actions may only be brought by shareholders if they own two or more percent of the corporation’s outstanding shares.
Utah’s annual statement requirement is actually stronger than the DGCL’s mandated biennial statement, though both states otherwise have identical language in this section. Additionally, Utah requires the statement to be publicized on the corporation’s website, while the DGCL only points out that such requirement may be present in a public benefit corporation’s own bylaw.
Overall, Utah’s Benefit Corporation legislation is quite strong and encourages triple-bottom-line business, while protecting against Utah common law’s leaning toward shareholder primacy. The statute currently does not require third-party audits of the annual benefit reports, and that is one place where we’d like to change. Nonetheless, a Utah Benefit Corporation may still employ a third-party auditor if they so choose. In these instances, we recommend considering B Corp Certification. To apply for B Corp Certification, your company will be audited by the nonprofit B Lab and validated to be good corporate citizens with triple bottom line business models.
Find out more about certified B Corps here.
Notable Utah B Corps
Cotopaxi. A certified B Corp since 2015, this outdoor company has plans to use recycled, repurposed, or responsibly sourced materials in all of its products by 2025. Cotopaxi also donates at least 1% of its revenue to nonprofits fighting poverty. Finally, company employees enjoy “in-the-wild” time, which means that 10% of their work time is spent outdoors or doing service.
Pure Synergy. Thus Moab-based company has been operating for over 30 years, but as a B Corp only since 2021. Pure Synergy sells organic nutritional supplements, which it manufactures in certified organic facilities that are entirely wind-powered. In 2022, the company reported eliminating over 14 miles worth of plastic from its product packaging,.
Barebones. Barebones, certified as a B Corp in 2016, makes anything from flatware to lanterns to duffle bags. Its wide array of products are primarily made from natural materials and shipped in recyclable or biodegradable packaging. Behind the scenes, Barebones donates to local initiatives and gives every employee a week of paid volunteer time, which can be spent with a nonprofit of the employee’s choice.
Utah Benefit Corporation and Business Resources
An Entrepreneur’s Guide to Going “B” by Center for Business and Environment at Yale
An Investor’s Guide to B Corps by Center for Business and Environment at Yale
Better Business by Chris Marquis
Benefit Corporation Law and Governance by Fredrick Alexander
How are B Corps and Public Benefit Corporations Related? by Rockridge
B Lab’s Knowledge Base – Resources on B Corps by B Lab
The Legal Requirement for Certified B Corporations by B Lab
The Delaware Public Benefit LLC: Use it to Become a “Benefit Company” in Your State by Rockridge
Rockridge® is a 4x Best For The World B Corp, designed to work with innovative and impact-oriented companies. See our contact page for ways to connect to learn more about our services and how we can help your company launch and scale.