A benefit corporation, more commonly known as a B corporation, is a new type of business entity gaining traction and popularity among mission-driven entrepreneurs and businesses. Although B corporations enjoy the same protections and permissions as traditional corporations, they benefit from some modified corporate governance provisions.

Unlike traditional corporations, this new governance model creates a solid foundation for long-term mission alignment and value creation by making additional commitments to higher standards of purpose, accountability, and transparency.

The main goals of a B corporation

    What sets B corporations apart from C corporations is their differing goals:
  • Purpose: Benefit corporations commit to creating public benefit and sustainable value in addition to generating profit. This sustainability is an integral part of their value proposition.
  • Accountability: Benefit corporations are committed to considering the company’s impact on society and the environment to create long-term stakeholder value for all stakeholders.
  • Transparency: Benefit corporations are required to regularly report to shareholders, and in most states report publically, on how the company is considering and balancing these interests and the extent that they have created stakeholder value or public benefit.

Benefit Corporation Perks

Traditional corporate law requires directors to use profit maximization as the primary—if not only—lens in decision-making. Many now see this as a hurdle in creating long-term value for all shareholders.

Benefit corporations are a response to this narrow model of traditional corporate law. While B corporations enjoy all the same perks as a traditional business corporation, benefit corporations have the flexibility and protection to consider all stakeholders when making long-term decisions. Moreover, the benefit corporation status protects a company’s mission as it undergoes capital raises, leadership changes, and even an IPO.

A Growing Movement

Companies interested in becoming a benefit corporation can incorporate in a state that recognizes benefit corporations or amend their existing articles to adopt benefit corporation status. Currently, 31 jurisdictions recognize the benefit corporation status, including Delaware, where benefit corporations are called “Public Benefit Corporations” or “PBCs.”

There are over 3,000 benefit corporations nationwide. This list includes well-known names such as Patagonia, Method Home Products, Altschool, Laureate, Klean Kanteen, and Kickstarter.

Corporate Form vs. Certification

Benefit corporations are sometimes confused with Certified B Corporations. A benefit corporation is a legal business entity form administered by the state. A Certified B Corporation is a company certified by B Lab, a nonprofit that certifies a company's social and environmental performance using the B Impact Assessment.

    To become a Certified B Corporation, a company must:
  • Meet the social and environmental performance standards and obtain a verified score on the B Impact Assessment
  • Be transparent about that impact by having a public profile on bcorporation.net
  • Fulfill the legal requirement to formalize a commitment to consider stakeholders alongside shareholders.

Benefit corporations are not required to obtain B Corporation certification, and for-profit companies of any geographic location or structure (LLCs, partnerships, traditional corporations, etc.) may pursue B Corp certification.

Get help from Corporate Creations

If you’re interested in incorporating your business as a B corporation, Corporate Creations can help. We offer a range of professional business services across all 50 U.S. states. Get in touch with us today to find out more about our services and prices.