New Corporate Entity for Socially-Conscious Entrepreneurs
If you're a socially-conscious person who wants to start a business, there is a new corporate structure just for you. In Maryland, you can apply to become a "benefit corporation." Fifteen businesses have already signed up and more are on the way.
"It's new ground, but it can play a more important role in compelling entrepreneurs to do social good while they make a profit,” said Casey Wilson, retail industry and sustainability programs manager at the Maryland Small Business Development Center (MSBDC) in a January 23 Washington Post article written by Danielle Douglas.
Since the law was passed in April 2010, the MSBDC has helped many companies qualify for the new business entity. "Your mission sets the tone for what you do every day in your business," said Pennye Jones-Napier in the article. She sells eco-friendly pet products in Takoma Park. "If your mission is aligned with social ideals, which our company is, then this is a terrific fit."
Other states are also considering the benefit corporation. They include Vermont, New York, and California. Illinois is not among them.
"While the benefit corporation offers socially-conscious business owners a way to combine their altruism with business, it does have some drawbacks," said Amy Murphy, director of Corporate and Community Services and the Illinois Small Business Development Center for Joliet Junior College. "For example, even though benefit corporations have less pressure to maximize profits, there are no tax breaks or procurement incentives for benefit corporations – at least none in Maryland. That can hurt business owners struggling to pay the bills while doing some good."
Nevertheless, a number of companies are applying for this hybrid entity. While interest is there, it is not as simple as applying for the more common Type S or LLC. Applicants for a benefit corporation must qualify for it through a third party review. These corporations are also required to report how they use their income and spend their capital to show evidence of socially responsible practices.
"Despite some of the drawbacks of this type of corporation, many business owners want to structure their business this way," said Murphy. "There is a strong desire among today's entrepreneurs to not only help themselves, but to help their communities as well."
It may also be good business. According to the Washington Post article, 61 percent of consumers surveyed in a 2010 Cone study said they purchased a product based on the company's long-term commitment to a cause or issue."That kind of overwhelming support for businesses that support a cause may be a trend entrepreneurs should consider," said Murphy.
For more information about how JJC's Small Business Development Center, call (815) 280-1400, or e-mail sbdc@jjc.edu.
The Illinois Small Business Development Center at Joliet Junior College is one of the small business service providers in the Illinois Entrepreneurship Network and is funded in part through a cooperative agreement with the U.S. Small Business Administration and the Department of Commerce and Economic Opportunity.
To learn more about the Washington Post story, visit: http://www.washingtonpost.com/wp-dyn/content/article/2011/01/23/AR2011012303556.html