LAW AND SOCIAL ENTREPRENEURSHIP

HOW MANY BENEFIT CORPORATIONS HAVE BEEN FORMED?

Kate Cooney (Yale), Matt Lee (Harvard), Justin Koushyar (Emory), and I (Belmont) have asked the titular question and are contacting the various secretary of state’s offices in states with benefit corporation laws in an attempt to compile reliable data.  Getting an accurate answer is not simple, however, because many states have simply lumped benefit corporations in with traditional corporations, and do not have an easy way to separate the two.

An employee at B Lab just sent me the data they have been able to scrape together given their powerful position in the social enterprise space.  Their data is about a month old (and therefore doesn’t include Delaware, which passed about a week ago and becomes effective 8/1/13).  According to the data B Lab has been able to collect, 251 benefit entities have been formed.  This is not to be confused with the 786 certified B corporations, which includes various entity types including traditional corporations and LLCs. See below for the number of benefit corporations broken down by state.  The number 251 includes benefit LLCs in Maryland.  Also, B Lab does not have data on New Jersey or South Carolina, and a number of state statutes are not yet effective.  It is possible that this data is incomplete, but these numbers are largely consistent with the data we have begun to assemble and with the early work of Professor Eric Talley (Berkeley) on California’s benefit corporations.

Frankly, some of these numbers are very similar to the numbers I was able to get on those states during my initial attempt last summer.  Also, for a few of the states, the current number is very similar to the number of benefit corporations formed on the very first day the given state statute became effective.  For example, New York reported 14 benefit corporations formed on the first day in early 2012, and evidently only 4 in the following year.  (The number of benefit corporations formed in NY on the first day varies a small bit, depending on the source, see here for 13, but, regardless, the general point remains the same).

Given that the first benefit corporation statute was passed only 3 years ago and some of the statutes (including Delaware’s) are not yet effective, it is a bit too early to judge the success or failure of the form.  However, fewer than 300 entities–spread over all the states with effective benefit corporation statutes–is a very small drop in the bucket.  Delaware has over 1 million entities formed in its state.  That said, benefit corporations have already captured plenty of headlines and caused vigorous academic debate.  Also, based on the response at various social enterprise symposia I have attended, it seems that the current generation of students has intense interest in this space.  Time will tell if the benefit corporation form ends up attracting more companies.

Arizona

Not in effect yet

Arkansas

Not in effect yet

California

85

Colorado

Not in effect yet

District of Columbia

Not in effect yet

Hawaii

5

Illinois

22

Louisiana

8

Maryland (*included Benefit LLCs)

39*

Massachusetts

16

New Jersey

?

New York

18

Pennsylvania

19

South Carolina

?

Vermont

14

Virginia

25

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