What is a Benefit Corporation? Key Benefits & B Corp Tax Perks

What is a Benefit Corporation and How Does it Work?

The benefit corporation provides an option for entrepreneurs who want to voluntarily adopt higher standards of corporate purpose, transparency, and accountability. The entity provides a way to legally cement a social or environmental mission into a company's corporate and legal structure. A benefit corporation is a corporation organized under a state's general corporation law that has elected to become subject to benefit corporation statutory provisions. Most benefit corporation statutes require that the entity "shall have the purpose of creating a general public benefit," meaning it must create a "material positive impact on society."

What Is a Certified B Corporation?

A Certified B Corporation is a business that meets high standards of social and environmental performance, accountability, and transparency. Unlike traditional companies, B Corps prioritize people and the planet alongside profit. These businesses are certified by B Lab, a nonprofit organization, ensuring they meet rigorous criteria for positive impact.

What Is B Corporation Certification?

B Corporation Certification is a designation given to companies that achieve high standards of social and environmental responsibility. This certification verifies that a business is committed to balancing profit with purpose. It involves a thorough assessment of a company's impact on its workers, customers, community, and the environment.

Advantages of a B Corp

Becoming a B Corp can enhance brand credibility and attract customers who value social responsibility. It can also improve employee satisfaction and retention, as people are increasingly seeking purpose-driven workplaces. Additionally, B Corps often gain access to a supportive community of like-minded businesses.

Benefit Corporation vs. BCorp: Are they the same?

No. Although the names are often used interchangeably, a benefit corporation and a "B Corp" are distinctly different: One (the "B Corp") is a certification and the other (the benefit corporation) is an actual business entity requiring incorporation by filing proper paperwork with the Secretary of State. A B Corp designation is obtained via a voluntary certification process undertaken by companies that want to label themselves as "sustainable businesses." When a company opts for B Corp certification there is no legal filing required. Instead, an aspiring B Corp submits itself to an audit-like process whereby a nonprofit group called "B Lab" measures a company's performance against strict social and environmental standards. On the other hand, a Benefit Corporation. is a legally recognized organizational structure, like an LLC or a traditional for-profit corporation is. While benefit corporations are very similar to the traditional for-profit corporation, they differ because of added requirements and duties. Companies incorporating as benefit corporations must adopt higher standards of purpose, accountability and transparency, which requires including a special clause in the company's articles of incorporation, and publishing an "Annual Benefit Report." Importantly, by creating a higher standard of purpose, benefit corporations also create an affirmative duty that directors and officers uphold and pursue the specified social and/or environmental purpose along with turning a profit.

Bottom Line

B Corporation Certification sets companies apart by demonstrating a commitment to more than just profit. It builds trust with consumers, attracts top talent, and positions businesses as leaders in social and environmental responsibility. For companies looking to make a meaningful impact, becoming a B Corp is a powerful step forward.

Frequently Asked Questions

How Does B Lab Assess a Company's Eligibility for Certification?

B Lab assesses a company's eligibility through the B Impact Assessment, which evaluates the impact of a business on its workers, customers, community, and environment. Companies must meet a minimum score to qualify. The assessment is comprehensive, covering areas such as governance, employee treatment, and environmental practices, ensuring that only genuinely impactful businesses receive certification.

How Do Shareholders Influence Decisions in a Benefit Corporation?

In a Benefit Corporation, shareholders can influence decisions by holding the company accountable to its stated social and environmental goals. Unlike traditional corporations, Benefit Corporations are legally required to consider the impact of their decisions on all stakeholders, not just shareholders. This allows shareholders to advocate for responsible and sustainable business practices.

What Financial Benefits Can a Company Gain by Being a B Corp or Benefit Corporation?

B Corps and Benefit Corporations can attract investment from socially responsible investors, enhance customer loyalty, and improve employee engagement. These companies also benefit from tax incentives in some regions and gain access to a supportive network of other mission-driven businesses, which can open doors to new partnership opportunities.

How Does the Certification Fee Structure for B Corps Work?

The certification fee for B Corps is based on a company's annual revenue. Smaller businesses pay lower fees, while larger companies pay more. Fees generally range from a few hundred to several thousand dollars per year. This sliding scale ensures that certification is accessible to businesses of all sizes, from startups to multinational corporations.

Can Startups Register as Benefit Corporations from the Outset?

Yes, startups can register as Benefit Corporations from the beginning. This involves incorporating as a Benefit Corporation in states where it is legally recognized. Doing so allows startups to bake social and environmental impact into their mission and governance structure from day one, setting the stage for sustainable growth and long-term success.