Entity Choice

What Is a B Corporation?

Adopt higher business standards and community purpose from the outset.

Deborah Sweeney

By Deborah Sweeney

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.

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