California Creates Two New Types of Corporations: Understanding the Benefit Corporation and Flexible Purpose Corporation

On January 1, 2012, two California bills became effective that create the B-corporation and the flexible purpose corporation. Unlike the traditional corporations, these new forms of corporations allow for-profit businesses to serve a socially-minded purpose without having to maximize shareholder return. Companies who wish to differentiate themselves from purely profit-driven companies should determine whether adopting either the benefit corporation or flexible purpose corporation structure makes strategic sense. Seven states have now adopted the benefit corporation structure and similar legislation is pending in four additional states.

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