Does Texas Have Benefit Corporations?
Benefit corporations, often referred to as B-corporations, have been around for a few years in some states, but are still a new concept in the big picture of business organizations. Traditionally, a corporation's board of director was bound to make decisions for the purpose of benefiting the corporation's shareholders. Benefit corporations allow directors to participate in business activities and make strategic business decisions which promote the common good — but which don't necessarily produce the greatest profit for shareholders.
So, what's the big deal about benefit corporations?
Directors of traditional corporations have a legal duty to maximize economic returns for company shareholders. If implementing a greener business model cuts into profits, shareholders can make a case against the directors for failing to maximize profits.
Alternatively, B-corporations are formed for the purpose of making a profit and for promoting the common good. Directors enjoy greater flexibility to promote sustainable “green” business practices and engage in other activities to benefit society.
Besides the obvious potential benefits, reporting requirements could help consumers distinguish between businesses claiming to be environmentally conscious and those who actually make a difference.
When will Texas get benefit corporation law?
Elsewhere, 20 states have passed B-corporation legislation and 16 more have introduced B-corporation legislation. Although the movement is gradually making its way through the country, Texas has not passed a B-corporation law, despite the efforts of interested groups such as the Texas Green Chamber.
For legal advice about starting or managing your business, contact an experienced Bryan-College Station, Texas business law attorney. Our attorneys guide you through business formation and answer your management questions, including employee and compliance issues. Call the Peterson Law Group to make an appointment at 979-703-7014 or fill out our online contact form.