Tennessee is a great state for doing business, but if we want to keep our reputation, we will need to keep up with the evolving goals of many entrepreneurs.
This year, state lawmakers will decide whether Tennessee joins a growing number of states that allow the formation of benefit corporations, organizations that focus on social good and profitable enterprise.
For-profit corporations formed in Tennessee are currently bound by law to one purpose: maximize financial return for shareholders. There is nothing wrong with the quest for sustainable profits, but this narrow requirement limits new ideas of how a business can operate.
A benefit corporation is a new type of for-profit entity that gives businesses the choice of furthering a social cause in addition to making money. Since 2010, 26 states and the District of Columbia have passed and implemented benefit corporation legislation, resulting in over 2,100 of these businesses being created, most within the past year alone. Benefit corporations are treated the same as other for-profit entities for tax purposes—no tax advantages are provided.
SB 972 by Sen. Steve Dickerson (R-Nashville) and HB 767 by Rep. Jason Powell (D-Nashville) would allow the formation of benefit corporations in Tennessee.
Companies that voluntarily organize this way have three distinct features. First, they adopt a specific corporate purpose to positively impact society, such as buying supplies for their business locally or conserving the environment.
Second, they are required to consider how their business decisions impact their public benefit purpose, in addition to shareholder return on investment. Lastly, they are required to produce an annual benefit report to the public that assesses their overall qualitative performance.
We are starting to see more examples of entrepreneurs and companies that want to incorporate their own morals and beliefs into their for-profit operations.
One example of such a social enterprise is Warby Parker, a highly regarded retailer that has plans to open its first office outside of New York right here in Nashville. Warby Parker produces affordable, yet stylish eyeglasses. The company also provides a free pair of glasses to someone in financial need for every pair sold. Warby Parker has undergone a thorough benefit corporation certification process and may pursue formally converting to a benefit corporation in the future.
Read more here.