New corporate structure fits between for-profit and nonprofit organizations

  • Article by: PATRICK KENNEDY , Star Tribune
  • Updated: February 1, 2014 - 2:00 PM

A corporate structure that fits between for-profit and nonprofit organizations is being proposed for Minnesota.

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Heidi Neff Christianson, of Nilan Johnson Lewis, is helping to write legislation to create a new type of business entity in Minnesota.

Photo: JOEL KOYAMA • jkoyama@startribune.com,

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A proposed new organizational structure for Minnesota corporations aims to put the public benefit mission of the organization ahead of the interests of shareholders.

Heidi Neff Christianson of the Minneapolis law firm Nilan Johnson Lewis is a member of a committee writing legislation for this new type of entity called the public benefit corporation, known generally as B-Corps. The designation would fit between traditional nonprofits and for-profit organizations.

Two forms of public benefit corporation could be formed: general benefit and specific benefit corporations. Each will “require a corporate purpose broader than shareholder value maximization that do not prohibit pecuniary gain for shareholders.” In other words the mission of the organization will have priority over investment returns for shareholders.

A public benefit organization will not have the tax advantages of nonprofits nor the oversight. It can pay net income to investors but those investors would have agreed to a pre-established way of doing business that will have public benefits.

Twenty states already have passed legislation allowing B-Corps and 18 more states, including Minnesota, are working on legislation.

Q: Minnesota State Sen. John Marty had proposed B-Corp legislation in the past, but the Minnesota State Bar Association had opposed it. Why?

A: We had been opposing Sen. Marty’s legislation for a couple of years because the bar didn’t feel that it stood up well to other states’ legislation. In the last year, we’ve come around to agreeing that, because there are a multitude of states that have this legislation, we should have a good version of it. Delaware passed its law in July, which sort of caused everyone else to realize that we will be behind if we don’t have it. [Many companies incorporate in Delaware because of its corporate-friendly laws.]

Q: What happens if the state doesn’t pass this legislation creating public benefit corporations?

A: Our lawyers will have to use the laws in other states to form them and then qualify them to do business here, which is an extra expense.

Q: Is there any opposition or concerns to the law?

A: There is a concern that nonprofits will be hurt by this competing entity that looks just a lot like them. Marketplace confusion is the chief concern.

Q: What are some distinctions of B-Corps?

A: Public benefit corporations are taxable; they don’t have any tax advantages. You can’t get a tax-deductible contribution for ­making an investment in a benefit corporation. And ­benefit corporations return net assets to ­shareholders; they have the ability to pay ­investors.

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