What is a B-Corporation?

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."

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.

Learn More

Was this article helpful?

Start a B Corporation for only $69 + State Fees