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Kickstarter Becomes a Public Benefit Corporation

Crowdfunding platform Kickstarter has announced it is reincorporating as a public benefit corporation, The New York Times reports, a legal designation that protects for-profit companies that want to do well and do good at the same time by affording them the freedom to pursue corporate purposes beyond maximizing profits.

A relatively new designation, public benefit corporations have been signed into law be several states, including Delaware, where Kickstarter is reincorporating, and which began allowing public benefit corporations in 2013.

Kickstarter says it doesn’t ever want to sell or go public because that would push it to make choices that may not be in the best interest of the company.

The popular online crowdfunding website lets people raise money to help fund all types of projects, and has helped sustainable innovations get off the ground — everything from solar scooters to sustainable microbreweries.

The platform also has served as an alternative funding source to startups spurned by traditional investors. San Francisco Bay Area startup ECOlunchbox, for example, recently concluded a successful Kickstarter campaign, raising more than $50,000 to bring to market a new line of sustainable lunch containers after angel investors rejected the project.

Kickstarter’s move to become a benefit corporation builds on its decision last year to become a B Corporation, a voluntary, non-legal designation certified by the nonprofit B Lab. To become a B Corp, companies must meet rigorous environmental and social-responsibility standards, which they report annually to shareholders. Prominent B Corporations include Ben & Jerry’s, Etsy and Green Mountain Power, among others.

Kickstarter’s decision diverges from many tech startups, such as Uber and Airbnb, which have raised billions from venture capitalists with the expectation of generating large profits. Granted, Kickstarter’s new designation as a benefit corporation doesn’t prevent it from selling itself of going public, and it remains a for-profit entity, but it’s now holding itself to a particularly high standard of transparency, The New York Times reports.

Under traditional corporate law, for-profit businesses exist to create maximum profit for stockholders, but doesn’t take into account the needs of all stakeholders, including the interests of employees, the environment and the communities in which the organizations operate. This means that directors would be liable for pursuing social and environmental good at the expense of pursuing maximum profit.

By creating a legal obligation to pursue the triple bottom line, rather than just profits, benefit corporation legislation protects directors and management. The process for becoming a benefit corporation differs by state, but generally companies that are interested in operating as a benefit corporation must explicitly list that part of their corporate purpose includes creating a general public benefit. They are now required to have a material positive impact on social and environmental goods as part of their corporate purpose.

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