Skip to main content

Are You Smug Enough to Run a Public Benefit Corporation?

By September 23, 2015Internet Lawyer
public benefit corporation

Should your Internet company become a public benefit corporation?

There’s a lot of buzz generated by Kickstarter’s decision to reincorporate in Delaware as a public benefit corporation. In the tech community and the media, it’s being heralded as the equivalent of Mother Teresa’s founding of the Missionaries of Charity.

Before you know it, those Silicon Valley orphans will have their bellies full of wholesome Kickstarter organic non-GMO vegan meals…or something like that.

A Public Benefit Corporation is a Socialist Entity

Whether your Internet business is a privately held corporation or a limited liability company (LLC), those who run the entity have a fiduciary duty to the business’ equity owners (e.g. corporate shareholders, LLC members, etc.).

If you’re a capitalist, you’ll understand that this means focusing on building the company’s value and profits for its owners.

In contrast, being a public benefits corporation lets those who run the company avoid liability for using revenues to pursue other goals. For example, Kickstarter’s new charter empowers the crowdfunding venture to spend money on the arts, “invest in green infrastructure” regardless of the cost, and to fight “systemic inequality” on behalf of anyone the company’s management feels is oppressed.

Reading the charter, it provides enough wiggle room for Kickstarter’s management to lobby Congress to ban fossil fuels or to pay for Bruce Jenner’s “sex change” operation to become Caitlyn Jenner in support of transgender equality.

Is a Public Benefit Corporation Right for You?

Let’s cut to the chase.

Converting your Internet company to a public benefit corporation probably makes sense if:

  • You’re a pretentious jerk who likes to pretend you’re better than other people because you’re “socially responsible” or “environmentally conscious.”
  • You plan to mismanage your company’s assets to support pet causes that have nothing to do making a profit for the business’ owners.
  • You majored in Peace Studies instead of Business in college.

What if you want to support charitable causes with your Internet business?

Perhaps you should consider following the path of Apple’s Steve Jobs. During his life, he focused on building up Apple into a very profitable company rather than turning it into some type of socialist experiment at the expense of shareholders.

However, as a successful entrepreneur, Jobs gave away a fortune to various charities during his lifetime from his own assets. He didn’t cripple Apple’s growth by looting it for a “public benefit.”

Was Becoming a Public Benefit Corporation the Right Move for Kickstarter?

Who knows?

But it certainly isn’t the right move for 99.99% of Internet business owners to make with their ventures…if building a profitable company is your primary goal.

Talk with your Internet lawyer and accountant if you’re interested in pursuing the idea. However, chances are they’re going to tell you to pass on the public benefit corporation fad.

Mike Young, Esq.

Author Mike Young, Esq.

Mike Young has been practicing business and technology law since 1994 and is an angel investor in startups. He's been an entrepreneur since 1988. To get legal help from Attorney Young, click here now or call 214-546-4247 to schedule a phone consultation.

More posts by Mike Young, Esq.