More and more business owners are incorporating a charitable intent or purpose into their companies. However, many still wish to remain a for-profit business and therefore do not apply for non-profit or tax-exempt status. Recently, the Minnesota legislature and Governor Dayton passed into law the Minnesota Public Benefit Corporation Act, which allows a business to make a public proclamation of the company’s intent to incorporate some form of charitable benefit into their for-profit business.
The Act
The Minnesota Public Benefit Corporation Act (the “Act”) is not effective until January 1, 2015. After such time, a corporation can make an election under the MN Secretary of State’s office to become a public benefit corporation and particularly specify whether the corporation is a general benefit corporation (“GBC”), a specific benefit corporation (“SBC”), or essentially a combination of the two. Under the Act, a GBC is a corporation that elects to pursue a general public benefit and a SBC is a corporation that elects to pursue a specific public benefit.
The Definitions
Under the Act, a general public benefit is defined as “a net material positive impact from the business and operations of a general benefit corporation on society, the environment, and the well-being of present and future generations.”1
A specific public benefit is defined as “one or more positive impacts, or reduction of a negative impact, on specified categories of natural persons, entities, communities, or interests, other than shareholders in their capacity as shareholders, as enumerated in the articles of a public benefit corporation.”2
Key Points
The few items to note about the Act are:
- Currently, only corporations can make this election. Limited liability companies (LLCs) and partnerships do not have the ability to make this election yet under the Act.
- There are no tax benefits for making this election to be a public benefit corporation (other than any regular tax benefits the company would receive for donating money to any non-profit organizations). This is NOT an election for non-profit or tax exempt status.
- All of the laws that currently apply to corporations formed under Chapter 302A of the Minnesota Statutes still apply to the corporation, except where the law might conflict with the Act under Chapter 304A for corporations that have elected to be a public benefit corporation.
- If the business makes the election to be a public benefit corporation, the company must use in its name the appropriate choice of the following: “General Benefit Corporation,” “GBC,” “Specific Benefit Corporation” or “SBC.”
- Lastly, the corporation MUST file an annual report with the Secretary of State to provide details of how the company upheld and met its general or specific public benefit. If the company fails to file the annual report, it will result in the loss of the public benefit corporation status.
You can read the full text of Chapter 304A here. Again, the Act is not effective until January 1, 2015. However, if you wish to form a public benefit corporation, or convert an existing corporation into one, contact an attorney to discuss in more detail the rules and regulations required to make the election.
1 & 2 Minnesota State Legislature – Minnesota House of Representatives H. F. 2582
