California Becomes Seventh State to Offer 'Benefit Corporation' Status

A number of companies in the Golden State are electing to be legally structured as "benefit corporations" to preserve their social or environmental priorities.

Passed last year, California's Assembly Bill 361 helps to shield benefit corporations from lawsuits brought by shareholders complaining of diluted stock value as a result of humanitarian efforts or a lack of focus on profits.

"Under the basic corporate laws of the state up until [last week], investor interest in a company trumped the ability for a company to have a mission," reports Mark Anderson for the Sacramento Business Journal. "And in a court with the old corporation structure, the investor's right to a profit was more important than the mission."

Outdoor apparel brand Patagonia was among the first companies to apply for benefit status last week. Founder and CEO Yvon Chouinard told the Los Angeles Times that the structure will help mission-driven companies retain their social and environmental objectives.

California now joins six other states that offer businesses the "benefit corporation" status: Vermont, Maryland, New York, New Jersey, Virginia and Hawaii.