Short answer – nothing . . . yet. You see, as a Grand Rapids, Michigan business lawyer I try to keep my “ear to the ground” when it comes to the future of business law – both here in Grand Rapids, Mi and nationally. There seems to be a growing national trend for state business laws to allow a “Benefit Corporation.” Five states already have such laws and Michigan is one of six states currently considering enacting B Corporation laws.
Generally speaking you can currently form two types of Corporations in Michigan – for profit or non profit. Yes, there are more, but those are the two most common. For profit Corporations can then elect to be treated as either a C Corporation or an S Corporation for tax purposes. Please note that you don’t “form” a C Corporation or S Corporation – that is a tax election (and a topic for a future blog post).
Benefit Corporations would function the same as C Corporations in terms of taxation, but would give businesses the fiduciary duty to consider non-financial interest when making decisions and require accountability through annual reporting. This is mainly accomplished and carried out by appointing a “Benefit Director.” The driving cause behind the Benefit Corporation is providing a way for business Corporations to further environmental, sustainability and other goals without running afoul of Director fiduciary responsibilities.
You see, Directors are legally obligated to act in the best interest of the Corporation’s shareholders. This could leave them open to the threat of lawsuit from one or more shareholders if they make a decision that is more mission driven (e.g. good for the community with potentially little or no benefit to the shareholders). Forming as a Benefit Corporation would not only allow for those types of “greater good” decisions but also hold them accountable via a Benefit Director and Benefit Officer(s), annual reporting and a shareholder right to enforce a higher standard of action.
I can see this being of particular interest here in West Michigan. We have a remarkable reputation for incorporating sustainability into our businesses and lives and for having a focus on the “greater good.” I’m looking forward to monitoring developments on Benefit Corporations in Michigan and will post again with any updates.
Michael Lichterman is a relationship-based business attorney who leverages his business, marketing and legal knowledge to help business owners and entrepreneurs create a Foundation for Business Success™. This goes beyond merely drafting a set of documents – it’s about proactively preparing the business and the business owner for continued growth while remembering the “human side” of running a business. He best serves small business owners (less than 50 employees) and entrepreneurs. He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients and their businesses – many of which have become great friends.