Law360, New York (February 08, 2012, 12:36 PM ET) -- On Jan. 3, Patagonia, the outdoor apparel company, signed on to become California’s first benefit corporation. The formation and operation of benefit corporations are now authorized in seven states, including California, New York, New Jersey, Vermont, Maryland, Virginia and Hawaii. Legislation to authorize the formation of benefit corporations has been introduced in several other states, including Michigan, North Carolina and Pennsylvania.

The formal establishment of this new corporate structure is necessary in order to give companies legal protection to consider nonfinancial factors when making decisions. Without...