What is a benefit corporation?
A Benefit Corporation (also referred to as a B Corporation) is a type of for-profit corporation that aims to create shareholder value like any other for-profit companies. The benefit corporation was created to provide 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.
The laws that apply to a standard corporation law apply to benefit corporations as well, except where those provisions conflict with or are inconsistent with the benefit corporation provisions. So just like a traditional for-profit corporation, a benefit corporation is an independent legal and tax entity separate from the people who own, control and manage it.
Because of this separate status, the owners of a benefit corporation don't use their personal tax returns to pay tax on corporate profits - the corporation itself pays these taxes. Owners pay personal income tax only on money they draw from the corporation in the form of salaries, bonuses, or distributions.
Why file a business as a benefit corporation?
Forming a B Corporation provides the same benefits as other corporate entities, including limited liability protection for its owners, a formal corporate structure, and the ability to sell shares of stock. Forming a Benefit Corporation also differentiates your brand and demonstrates that your business is mission-driven, which can help to generate outside interest from customers or potential investors.
What is the difference between a B-Corporation and a Nonprofit Corporation?
Unlike non-profits, benefit corporations are for-profit entities and therefore do not offer the same tax advantages as a nonprofit. Both nonprofit corporations and benefit corporations aim to make a positive impact on society and the environment, but benefit corporations conduct business activities that presume a return on investments, while non-profits seek charitable donations to fund their business practices. Nonprofits cannot become benefit corporations themselves, but a nonprofit may create a benefit corporation as a vehicle for conducting and scaling the earned-income activities of the nonprofit.
What is the difference between a B-Corporation and a B Corp?
While the terms are often used interchangeably, a benefit corporation (B-Corporation) and a "B Corp" are two distinct things. The B-Corporation is an actual legal entity recognized by the Secretary of State and formed upon the filing of required paperwork, like the Articles of Incorporation.
Conversely, the B Corp is a certification, conferred upon a company that meets certain social and environmental sustainability standards. Therefore, it is possible to be a B Corp but not a legally recognized B-Corporation, thus allowing other business forms like LLCs or professional corporations to voluntarily commit themselves to the purpose, transparency and accountability requirements, inherent in B-Corporations.