Why We Filed (and No, There’s Not Really Anything in It For Us)

…if by “anything,” you mean something financial or tangible.

A few weeks ago, I facilitated a panel response to the ChangeMatters report on the first wave of benefit corporations in the country and implementation of the first benefit corporation and LLC laws in the country. The audience was mostly emerging professionals in socially-responsible business—members of DC Net Impact. A number of questions related to why entrepreneurs would choose a designation for which there are no particular tangible benefits, and afterwards one of the panelists mused about not being able to provide a satisfying answer. It’s the question an undergraduate student in that audience still had as she followed up with me this week for a paper she’s working on. My answer hasn’t much changed from the one I offered a year ago.

I did tell a reporter or researcher asking me the same question a few months ago that in terms of revenue and profit we’re looking at probably our strongest quarter (which is continuing to 6 months) to date. While I wouldn’t attribute it to the new designation, I might suggest that it may be due to an at least slightly stronger brand identify and higher profile that probably was reinforced by our research and education work around hybrid entities and social enterprises. 

The following post appeared on Unsectored on January 4, 2012.  The interviewer is Jeff Raderstrong.

JR: Why did you decide to become one of the first Benefit LLCs in the country?

AK: My team had been following the new Benefit Corporation law, as it came into effect in Maryland in the fall of 2010. We realized that most local businesses are formed as LLCs, and the new designation just wouldn’t apply to them. That seemed unfair, and we with a few others suggested to legislators that they open the option to LLCs. I ended up testifying in Annapolis and by the end of the session the Benefit LLC became law in our state. At the time, my business was growing and it was probably time to file as an LLC anyway—so it was natural that we step forward and try this new designation.

JR: What were the challenges you faced in being a for-profit, socially-minded business prior to you becoming a Benefit LLC?

AK: I wouldn’t say we had significant challenges, other than those of any consulting-training-fundraising firm. We operate out of social values, which we share with our clients. We are in the social change business, too—it’s just that we work behind the scene. Becoming a Benefit LLC doesn’t change anything fundamentally about what we do or how we do it. The designation simply acknowledges our approach and intentions.

JR: How has this switch helped your business? Have you seen any concrete organizational changes since making the switch?

AK: It does attract a bit of attention, or at least curiosity, but there are only a few operational changes. We will need to file an end of year report on social benefit impact, as measured against a third party standard. So there will be additional reporting requirements, along with the new-for-us standard LLC accounting and reporting requirements.

JR: Some have criticized benefit corporation distinctions as merely another way for companies to signal their social responsibility, without many gains to be had regarding social impact. Do you agree with these critics?

AK: It’s too soon to say. So far, there are so few legally-defined Benefit LLCs and Benefit Corporations that it’s just not fair to answer. I will say that the critique that the model Benefit Corporation law is no more than a framework without state agency authority or responsibility for implementation is spot on. My colleagues and I are working on filling out the law, suggesting concrete steps and requirements for implementation, both in Maryland in elsewhere.

JR: Do you think there are long-term benefits for a broader adoption of these new “for benefit” organizational structures? If so, why and what are they?

AK: Increased attention and resources on this kind of entrepreneurial activity definitely has the potential for creating more sustainable and local jobs, for increasing community wealth, and improving the quality of life in communities. It’s important to support businesses that are demonstrating that it is possible—and desirable—both to do well and do good. But the challenges now are to implement fully these experimental laws, to cultivate all kinds of social enterprises, and to start measuring impact.