With the first regular and first extraordinary sessions of the 63rd Idaho Legislature respectively adjourning on April 10th and May 18, 2015, Idahoans can expect to see many new bills taking effect this month. While much of the session focused on ways to improve the public school system, Senate Bills 1025 and 1076 are of particular importance to the business community.
Senate Bill 1025, titled the Uniform Business Organizations Code (the “Business Code”), is Idaho’s adoption of the uniform code drafted by the Uniform Law Commission, which provides states with legislation in hopes of bringing stability to critical areas of state statutory law. The Business Code is essentially a compilation of several existing business entity acts, aimed at harmonizing existing law and creating a code that is easier to use. Many Idaho statutes, including General Business Corporations, the Limited Liability Company Act, Idaho Entity Transactions Act, Uniform Limited Partnership Act, and Uniform Partnership Act, were repealed for the purpose of relocation. Several technical edits were made to create a cohesive and workable Business Code; however the substance of the relocated statutes was not changed.
The creation of the Business Code allows for parallel language and provisions which are applicable to various forms of business entities and eliminates the often unintended, inconsistent provisions in the separate entity acts. Such cohesion also allows for an easier process of amendment. For example, Part 1 of the Business Code sets forth the basic provisions concerning filing requirements, entity names, registered agents, foreign entities, and administrative dissolution. Now, the amendment can be made to the filing requirements without having to ensure the same amendment is made to Idaho’s other entity statutes. The Business Code takes effect July 1, 2015, except for sections two, four, and five, which don’t take effect until July 1, 2017.
Senate Bill 1076, the Benefit Corporation Act, establishes a “new class of corporation that voluntarily meets higher standards of corporate purpose, accountability, and transparency,” according the bill’s statement of purpose. An Idaho benefit corporation status requires the corporation to have a purpose of public benefit, such as a positive impact on society or the environment. A company does not have to receive certification to hold such a status.
A benefit corporation’s directors and officers operate the corporation, which is still taxed as the company was prior to the designation, with the same authority as in a traditional corporation, but are under an additional duty to consider the company’s impact on society as a whole, the local community, and the environment. Furthermore, a benefit corporation is required to prepare an annual benefit report which includes a narrative description of the ways in which the company pursued general public benefit and the extent to which public benefit was created during the year, among other things. Shareholders of a benefit corporation are required to receive such benefit report within 120 days following the end of the company’s fiscal year.
Neither Senate Bill 1025 or 1076 will have a fiscal impact on the state’s general fund or to local government. The Secretary of State may incur expenses associated with the creation of new standardized entity filing forms, but the costs are expected to be covered by the filing fees.
With so many changes to Idaho’s statutory makeup, and with the addition of a benefit corporate status, the first session of the Idaho Legislature brought many things for the business community to be aware of and consider. We encourage you seek assistance with the creation of any new entity to ensure proper selection and a complete understanding of the tax implications.