Which of the following statements about benefit corporations is true?
A) A benefit corporation is a for-profit organization that has a stated purpose that includes creating a material positive aspect on society.
B) All 50 U.S. states and the District of Columbia has passed laws allowing mission-based businesses to incorporate as benefit corporations.
C) Small companies (those with less than 50 employees) cannot incorporate as benefit corporations.
D) Companies that incorporate as benefit corporations must get B Lab certification.
E) The primary disadvantage of incorporating as a benefit corporation is the risk of being sued by shareholders.

Question

Quizplus · Accepted Answer

A benefit corporation is a for-profit business that has a stated purpose to create a positive impact on society in addition to making a profit. This differentiates it from traditional for-profit corporations, which prioritize maximizing shareholder value above all else.

B is incorrect because not all U.S. states have passed laws allowing benefit corporations.

C is incorrect because there are no restrictions on the size of a company that can incorporate as a benefit corporation.

D is incorrect because certification from B Lab, a non-profit organization that assesses a company's social and environmental impact, is not required to incorporate as a benefit corporation.

E is incorrect because the benefit corporation legal structure provides protection to directors and officers who prioritize the company's social or environmental mission over shareholder value. Therefore, shareholders are less likely to successfully sue a benefit corporation on the basis of prioritizing social or environmental goals over maximizing profit.

Which of the Following Statements About Benefit Corporations Is True