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.
What are the benefits of filing as a benefit corporation?
Forming a B Corporation provides the same benefits as other corporate entities, including limited liabilty 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 Non-Profit Corporation?
Unlike non-profits, benefit corporations are for-profit entities and therefore do not offer the same tax advantages as a nonprofit. Both nonprofits 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 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.