Benefit Corporation Operational Issues – Part 1
What are a few of the things you need to know before you either start or convert an existing corporation in Ohio to a Benefit Corporation. This article will discuss what you need to know while starting a Benefit Corporations.
1. Name of the corporation. A Benefit Corporation is allowed to have the word “b-“ or “benefit” in the name of the corporation. The name is also to include the corporation identifier inc, corp, etc.
2. Purpose of the corporation. The articles of incorporation have a section where you are able to indicate the purpose of the corporation. The Secretary of State allows the purpose clause to be left blank and then this means that the corporation is able to transact any lawful business within the State of Ohio (but with a few exceptions). However, if you are going to want to be considered a Benefit Corporation, then your corporation will need to have, at least in part, a beneficial purpose. The Ohio Legislature defines a beneficial purpose to be having a bona fide positive effect or to reduce one or more bona fide negative effects of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature for the benefit of groups other than the corporation’s shareholders.
This is the point of a Benefit Corporation. The corporation makes decisions taking into consideration the impact not just on the corporation’s shareholders but also other stakeholders in the community.
3. Annual Benefit Report. The corporation may set out in writing that the corporation will publish an annual report detailing the beneficial purpose of the corporation. The requirement for an annual beneficial report may be provided for in the articles of incorporation, the code of regulations, or another written agreement. This annual beneficial report would be provided to the shareholders at the annual shareholder meeting. An example of this annual report would be that the corporation states its beneficial purpose(s), the steps that the corporation is taking to achieve this beneficial purpose(s), and a lookback or analysis in an effort to determine the effectiveness of the corporation’s beneficial efforts.
To learn more about how electing to become a Benefit Corporation impacts directors along with corporate liability limitations, please see the article titled Benefit Corporation Operations Issues – Part 2.
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