You may have seen companies advertising themselves as a benefit corporation, or B-Corp, but what does that mean? In short, a B-Corp is a business that meets high standards of verified performance, accountability, and transparency on certain key factors. There is a growing demand for sustainable and socially responsible companies – and that’s where B-Corps stand out to consumers, employees, and investors alike. Consulting with an experienced corporate attorney can help advise you as to whether a B-Corp makes sense for your business.
What is a Benefit Corporation? Is it the same as Certified B-Corp?
Not quite.
Let’s start with benefit corporations. A benefit corporation may also be referred to as a B-corp, but you won’t see it called “Certified” – which we’ll get to shortly. A benefit corporation is a legal entity classification for a for-profit business that serves a beneficial purpose. A benefit corporation must commit to a societal and environmental mission purpose in its corporate documents.
Benefit corporations can go even further by becoming certified by the non-profit organization, B-Lab. To receive the official “Certified B-Corp” designation, the company must pass the B-Corp Impact Assessment, which measures the areas of Community, Workers, Governance and Environment. There are also fees involved and future audits to ensure compliance with all of B-Lab’s standards.
Is a B-Corp the same as a Non-Profit entity?
No. A B-Corp – whether certified or not – is a for-profit organization. This means that B-Corps do not receive or provide the tax benefits that a nonprofit is entitled to, among other differences.
What are the benefits of a B-Corp?
Whether Certified or not, forming your company as a B-Corp offers meaningful benefits, including:
- Credibility and Trust: The B-Corp structure validates the company’s commitment to social and environmental goals. Consumers look for brands they can trust and give back to society, and B-Corp structure or certification helps businesses stand out in a crowded market.
- Attracting Talent: Many employees, especially younger generations, want to work for employers whose values align with their own.
- Networking Opportunities: Operating a B-Corp opens the door to a global community of like-minded businesses. This network can lead to collaborations, partnerships, and shared learning experiences.
- Access to Resources: B-Corps often have access to resources, funding opportunities, and support from organizations that promote sustainable business practices.
- Legal Protection: In some jurisdictions, B-corps have legal protection to encourage social and environmental goals while still limiting personal liability, like a traditional corporation structure. It is important to know the laws of your jurisdiction, because not all states permit the formation of B-Corps, and states that permit B-Corps have different laws that vary state-to-state. For example, in New York, B-Corps are treated like regular corporations for tax purposes but can still deduct some of their expenses.
What are the downsides of a B-Corp?
- Cost: Forming a B-Corp can be more expensive than forming another type of corporation. Becoming a Certified B-Corp is an added cost. B-Corps (whether Certified or not) must also be prepared to spend more on their products and services. For example, if there is a cheaper material alternative to make a product, but that cheaper alternative is known to pollute the environment and may make factory workers sick, the B-Corp would likely be obligated to use the more expensive but safer material.
- Time Commitments: Whether Certified or not, a B-Corp must devote time to promoting its societal purpose.
- Responsibilities: B-Corps take on responsibilities when committing to sustainable business practices. This may mean having to change partnerships in supply chain or offering more PTO days or maternity/paternity leave to employees.
What positive impacts do B-Corps make?
B-Corps are redefining the business world, by challenging the traditional view that profit maximization is the only measure of success. In a world grappling with climate change, social inequality, and economic instability, B-Corps give businesses a great way to contribute positively to society. As B-Corps become more common, they inspire other companies to adopt similar practices and foster a more sustainable and equitable economy.
Conclusion
Whether you’re a consumer, an investor, or a business owner, B-Corps can make a big impact on your daily life. For more information on B-Corps, or if you are interested in starting one, reach out to our team for next steps.
