Benefit Corporation and Low-Profit Limited Liability Company - Research Paper Example

Module Benefit Corporation and Low-Profit Limited Liability Company (L3C) In today’s world, people are becoming creative in forming businesses that have a different approach from the contemporary sole agenda of making profits. These businesses have been instrumental in improving the environment. Apparently, they have been effective in improving the world especially in relation to pollution and environmental degradation. These new approaches aim to do more than make profits. These corporations have been effective in ensuring the environment is conducive for human existence (Kuratko 4). When relating this to personal life, it is evident that the world created a lot of pollution that has resulted in climatic changes. However, with the induction of such businesses, the world has been recording impressive performance in regard to pollution. As a matter of fact, this has heightened the activities which are geared towards improving the world. This has taught people that they can have different approaches in accomplishing their missions. For example, many businesses have enhanced their sustainability though they are engaging in society responsibility. Similarly, it has taught people to embrace better ways of production while reducing pollution and environmental hazards. The most common business formation in the recent times is the Benefit Corporation. This is a business that is formed by entities whose first objective is not to realize financial profits but to fulfil ethical goals such as transparency and accountability. These businesses are formed to consider the good of the society as well as the environment. Benefit corporations have redefined what is considered as being a successful company in the present climate that supports transparent and ethical business practices. With such preparations, the corporation is likely to reflect a positive impact on the community and the society (Pakroo 12). In terms of the impact on society, a benefit corporation is accountable to general public and issues an annual benefit report. The consumers and the general public then use the results of the corporation to determine if the benefit company has had a positive impact on its society (Lyons 10). After these, the public has to agree or disagree if there has been positive impact on the community. On the other hand, there has been formation of the low profit limited liability corporations in the world. This type of business aims to limit the gap between for-profit business and non-profit business entities. There are some businesses that are solely formed make profits, while others are formed without any interest in realizing profits. However, low profit limited liability companies have structured investments in an environment that is socially beneficial. Consequentially, they factor benefits of profitability while complying with the revenue collecting bodies which reinforce the national government's revenue generation while also functioning in the capacity of debt collectors. The only difference is that, L3c’s do not seek to consolidate their revenue. Therefore, they will work under the legal frame work and tax acceptance to run the businesses. Most of these corporations rely on market positions, branding, and the positivity accrued from social enterprising methods such as advertising. There are a number of reasons for formation of these corporations. First, there are limited numbers of companies that are formed solely to provide social benefits. Therefore, there is a limited supply of such services, yet, they are vital in running an economy. Apparently, most companies are formed for the sole purpose of realizing profits. As such, they will maximise their revenue and not participate in activities that bring social benefits to the society. Therefore, supporting the formation of such companies is of greater benefit to the society (Lyons 9). So, they will be able to benefit from the products and services of these upcoming companies. Without such an approach, it is possible that there will be no social benefit to the society if all companies are maximising their revenue collection while neglecting social benefits. Secondly, pollution is on the rise. This is a menace to the whole world as it has several ramifications. First, it can result in the spread of contagious diseases, which has increased the cost of healthcare. Secondly, there are many other complications such as air pollution, ozone depletion, global warming, the destruction of rain forests, and the destruction of soil fertility due to overpopulation that result from pollution (Chiras 6). Therefore, the formation of such companies is a prudent approach in seeking to limit pollution. The formation of such corporations has benefited the society because they look for better ways to reduce pollution. Thirdly, these corporations endeavour to meet the unending need for environmental conservation. There are few corporations that are dedicated to conserve the environment. Consequently, environmental conservation is an expensive activity that will require massive resources (Kuratko 6). To facilitate this goal, there is a need to incorporate socially conscious companies. When many companies set the same goal, they are likely to achieve better results. The formation of benefit corporations and L3c helps in achieving the common goals. Without such an approach, the activities of conserving the environment would still be a hard task to tackle. There are several types of businesses that have incorporated such an idea in their charters (Lyons 13). L3C organizations, for example, develop and sponsor sustainable environmentally friendly business projects in developing nations. There are establishments that connect private businesses in such nations with NGOs that seek to encourage the espousal of using other types of fuel than burning trees for cooking purposes in developing nations. Some companies that are faced with economic hardships could opt to take this initiative. Some benefit corporations have the option of using their cash reserves when they are faced with economic quagmires. For example, when they are in an economic stalemate, they often use their cash reserves since they do not want to lay off their workforce. In other companies, this could not be possible since they do not prioritise the issue of workers’ benefits. This is a positive approach as most of these companies continue offering their services for the benefit of the society. There are a number of corporations that are formed as benefits corporations. One well-known example is the Patagonia, Inc. This is a clothing company that is based in California, and mainly produces outdoor clothing. However, it has incorporated environmental sound methods such as donating 1% of its sales returns to grassroots environmental establishments and initiating a code of environmental performance that eggs designers to make environmentally sound raw materials in manufacturing clothing apparel (Chiras 12). It was formed in 1973 by Yvon Chouinard and has been instrumental in finding ways of solving environmental problems by giving back to the environment in terms of the cultivation of food, and use of energy and raw materials than just depleting resources. Below is a figure showing processes of strategic management at Patagonia. The financial Performance of Patagonia over a number of years The Financial Performance of GAP- A for profit organization The second variety of corporation that falls under the L3c platform is that which is formed in observance of the Maryland Benefit LLC legislature. Such a company determines to place a premium on generating a positive impact on the environment as well as society by creating eco-friendly products or aligning with other organizations that have similar social ideals in projects or activities that preserve environmental resources. These businesses are allowed to incorporate non-financial stakeholders by law. Benefit organizations work to generate value for stakeholders like their local communities, the global environment, suppliers, workers and customers in ways that do not decimate the environment. Benefit corporations can make decisions that may frustrate the more money-minded groups of shareholders. For example, if they have two options for realizing profits, they will choose the option that will not indiscriminately use precious environmental resources. Unfortunately, such options are usually not as profitable as those that do not take into consideration the consequences on the environment. Moreover, benefit corporations are also protected by law against pressures from shareholders who desire profits above all else when they esteem sustaining social and environmental value over realizing financial profits (Kuratko 7). Benefit corporations have to choose independent and credible third parties who will evaluate their environmental performances against their pledges to stakeholders. One principal benefit enjoyed by benefit corporations is in their categorization as a program related investments (PRI). Due to the fact that investors can only directly sponsor for-profit projects that are qualified as PRIs, many financiers do not invest in for-profit projects because of the uncertainty about whether they would take a lot of time and capital to attain a Private Letter Ruling to authenticate the proposed venture as a PRI or immediately be recognized as a PRI. An L3C organization’s operating charter deals this concern by specifically addressing its particular PRI-qualified reason for being formed, thus making it easier for investors to recognize it as a social-purpose business while also ensuring that its tax-exemptions stay secure (Pakroo 13). Any excess amounts from profits are used in the L3C organization’s sustainability. This allows smooth running of these corporations as they have sustainable accounts to pay their workforce and engage in social benefits. Works Cited Chiras, Daniel D. Environmental Science. New York: Jones & Bartlett Learning LLC. 2013. Print. Kuratko, F. Donald. Entrepreneurship: Theory, Process, Practice. New York: Cengage Learning, 2012. Print. Lyons, S. Thomas. Social Entrepreneurship: How Businesses Can Transform Society. New York: ABC-CLIO, 2012. Print. Pakroo, Peri. Starting & Building a Non-profit: A Practical Guide. New York: Nolo. 2013. Print. Read More