A Summary of Delaware Public Benefit LLCs

Benefit LLCs are a new entity choice in a handful of states, including Maryland, Oregon, Pennsylvania, and Utah. In 2018, Delaware joined this burgeoning group of states.

While the trend is young, Delaware’s adoption of this new entity is important. More companies call Delaware home than any other state, and it’s often an influential first mover with changes to its corporate framework, with other states following suit.

Similar to a public benefit corporation, Delaware defines a public benefit LLC as a for-profit limited liability company that’s “intended to produce a public benefit or public benefits and to operate in a responsible and sustainable manner.”[1] And like the corporation version, these LLCs must have a Public Benefit that reflects a positive effect--or reduction of negative effects--of an “artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature.”[2]

This statutory framework allows the company to balance financial interests with the public benefit stated in its governing documents. And within the framework of a limited liability company, it offers entrepreneurs and founders the ability to utilize the flexible structure of an LLC and taxation benefits while aligning the company to public-focused mission.

This is valuable virtue signaling. It lets investors, advisors, employees, and customers know about the socially-conscious mission enmeshed into the framework of the business. It also creates ease for investors to assess the business because of new statutory requirements, including a mandatory statement every other year that reports on the company’s promotion of its stated public benefit. The statement must include:

  • the objectives the company has established to promote the public benefit;

  • the standards for measuring its progress;

  • factual information based on those standards; and

  • an assessment of the company’s success in meeting its objectives.[3]

If you’d like to learn more about Benefit LLCs to discover if this is a beneficial move for your business, we’d be happy to go through this new framework with more depth to determine if this will help you generate the impact you seek.

This article was written by our emerging companies associate, Chris Jones. You can reach Chris via email.

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[1] § 18-1202(a).

[2] § 18-1202(b).

[3] § 18-1205.