Benefit Corporations and Certified B Corporations

Companies that desire to pursue a greater social goal, if not looking to form a traditional nonprofit corporation, often consider either a benefit corporation entity structure or a B Corp certification. They might do this to demonstrate transparency, build trust with clients or stakeholders, pursue environmental or social purposes outside generating revenue, or to differentiate themselves from competitors.

If you’re looking to run a for-profit business while meeting social goals, a benefit corporation could be the entity structure you need. While B Corp and benefit corporation are often used interchangeably, the terms do not mean the same thing. Keep reading to learn about the differences between a benefit corporation and a B Corp.

What is a Benefit Corporation?

A benefit corporation is a business entity structure, much like a traditional corporation or a limited liability company (LLC). The benefit corporation entity allows for-profit companies to set societal and environmental missions as their primary business objectives, beyond simply maximizing shareholder value.

Thirty-seven states and Washington DC allow entities to form as benefit corporations. While state filing fees vary and are subject to change, they typically range from $100 to $200. As with other types of entities, benefit corporations are required to appoint a registered agent to accept service of process and other legal documents. The registered agent must be available to accept notice of lawsuit and other government documents at a physical location. With registered agent services from Harbor Compliance, our local offices receive documents and forward them to you electronically the same day.

What are the Advantages of the Benefit Corporation Structure?

• Distribute Liability. The benefit corporation structure provides legal protection that balances financial and non-financial interests.
• Attract Talent. Many prospective employees are looking to build a meaningful career in multiple ways. This is possible with a benefit corporation. Employees can build a professional career in their desired industry, while focusing on social efforts that matter to them personally.
• Increase Investment Capital. Investors often see a business with a benefit corporation status as a more attractive investment opportunity because of the increased legal protection and mission transparency.
• Become a Leader. Benefit corporations are highly respected by investors and the community.
• Pursue a Greater Mission. With the benefit corporation structure, business owners focus on wider social and environmental goals beyond simply making a profit.

What is a B Corp?

The term B Corp refers to a special certification issued by an organization called B Lab. A company that has successfully applied and has become certified is known as a Certified B Corp. The first B Corps were certified in 2007. Not all Certified B Corp businesses are corporations, as they can also be LLPs, LLCs, etc. As more companies now focus their missions on wider social benefit, obtaining a B Corp certification is becoming more a popular choice.

According to the Harvard Business Review, the 21st century has created an emphasis on social stakeholder values, as well as social and environmental problems. Identifying as a B Corporation expresses to the public that an organization is interested in its stakeholders and their concerns.

The certification awarded by B Lab measures a company’s performance socially and environmentally. According to B Lab, companies seek B Corp certifications to build better business relationships, attract the right talent to their team, improve their businesses’ positive impacts, and protect their missions. B Lab plays no role in oversight for benefit corporations. However, B Lab has influenced legislation and offers free reporting tools to help benefit corporations meet all transparency requirements.

What are the Advantages of a B Corp Certification?

The advantages of a B Corp certification include:

• Distinction. With its social benefits, a B Corp certification can help your business stand out among competitors.
• Investment Potential. Socially responsible companies are appealing to for-profit and nonprofit companies.
• Tax Benefits. Benefit corporations have the same tax benefits as traditional corporations.
• Positive Impacts. The societal and environmental impact of B Corps improves business outcomes and enriches the lives of community members.
• Pliancy. A degree of flexibility comes with being certified as a B Corp, allowing them to achieve social goals and make money.

Key Takeaways

• A benefit corporation, which requires a registered agent, is a type of business structure that lets for-profit companies set nonprofit-like goals.
• A B Corp is a certification that attests to a company’s ability to meet social and environmental goals.
• Business owners can pursue the benefit corporation structure or the B Corp certification together or separately. A benefit corporation can further its mission with a B Corp certification, which proves to the general public and other companies that it is focused on social and environmental goals.