Everything You Need To Know About Benefit Corporations


Generally, businesses exist to make profits. A traditional corporation judges its management based on the company’s financial performance; thus, decisions that sacrifice profits attract shareholders’ actions.

In recent decades, there has been a shift from traditional corporations, with businesses becoming more aware of their impact on humanity. The increase in human suffering courtesy of companies prioritizing profits over social costs has led investors and consumers to switch to supporting businesses focused on social impact and profits.

Companies that aim at profits and a positive social impact are called Benefit Corporations. Here is everything you need to know about B Corporations.

How A Company Becomes a Benefit Corporation ?

Benefit corporation statutes vary among states, but generally, a company should outline its purpose in the articles of incorporation. The organization must demonstrate that it upholds public benefit through an annual report assessing its social and environmental performance through a third-party standard. Afterward, it will send this report to the shareholders and publish it on its website. You may also need to file the report with the state for approval.

The second way to become a Benefits Corporation is by applying for the B-Corp certification through B Lab. B Lab is a non-profit organization that avails certification to all businesses. The certification comprises completing an assessment evaluating the company’s impact on its stakeholders. B Lab staff then review the assessment for companies that need supporting documentation. If certified by the non-profit B Lab, you are a B Corp, while Benefit Companies registered by the state are called Public Benefit Corporations (PBCs)

Why Form A B Corp?

As a business owner or director, you may want to use your business for purposes other than profit. This will necessitate forming a B Corp to attain your corporation’s mission over time, differentiate your organization from competitors, and appeal to an environmentally and socially conscious audience. Owning a B Corp allows you to choose who to sell your corporation to. As a director, you can sell your corporation at a lower price to a buyer you believe will uphold the mission and values of the B Corp.

Qualifications For A B Corp

A business should have a public benefit purpose and commit to submitting annual reports of the stated mission progress to be a benefit corporation. The documents must include the following public benefit purposes;

  • The positive impact on society and the environment
  • Promotion of music or arts
  • Environmental sustainability
  • Advancements in public education
  • Sharing profits with charities

The Difference Between B Corps And PBCs

PBCs confer legal status, while B Corps do not. However, a prospective B Corp must score well on the impact assessment and incorporate ESG principles in its laws. This Corporation must also recertify every three years and sometimes publish its annual impact reports to update its stakeholders. This requirement is similar to that of PBCs in most states that require publishing a Benefit report.

Understand Your State’s Benefit Corporation Laws

Becoming a B Corp or PBC also depends on location. Some states recognize B corps nationally, while others only appreciate PBCs. Therefore, check with your state laws on whether you can adopt the B Corp framework awaiting your state to catch up with the PBC structure.


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