To B or not to B — The Benefits of a Benefit Corporation

Oct 18, 2015 · 4 min read

What does it take to be a benefit corporation and why do people do it?

What is a Benefit Corporation?

Between 2010 and 2015, 30 States have passed a law that allows the creation of benefit corporations. A benefit corporation is a for-profit company, but uses marketing and consumer services for goods. They not only make a profit, but share that profit for the betterment of the environment and/or society. They meet public standards and show all economic, social and environmental sales and growth. The job description for a CEO in a benefit corporation may not differ from any other CEO, except, when making decisions for the company, the CEO must also look at the impact it may have on society, the environment and their shareholders.

How is it different?

A benefit corporation is not to be confused with Certified B Corps. Certified B Corps are corporations that have been certified by the non-profit company B Lab. Certified B Corps have taken a test, and met legal standards in ordered to be given this title. If you’ve ever had “fair trade” or “organic” coffee, chances are the company the coffee beans are sold by is associated with or is a Certified B Corp.

Benefit corporations are mission driven. They have to be able to prove that they will last, and have goals for as long as they wish to be standing as a company. A benefit corporation will voluntarily meet the standards that corporations require. The key mission for most benefit corporations is a material profit or material positive impact on a society.

Any benefit company can become a certified B Corp, but normally a benefit corporation is a self- reported one, and requires less stipulations in terms of legal agreements. This is allowed as long as they are within the states that have passed laws that recognizes benefit corporations.

The long term goal of a for-profit business is normally to increase the profit and maximize financial gain. Retail stores, consumerism and something people interact with every day are examples. The purpose of a Benefit Corporation is to take some of their profit and give back to the community, the environment, and so forth. The purpose is to benefit.

As opposed to non-profit organizations, which take all their annual income and give it to charities. Non-profit organizations are also exempt from taxes because of this. While for-profit organizations are not exempt from taxes, according to some studies, they may be able to pay less depending on their income and social status.

It’s not easy for one to just wake up and decide they want their dream business to become a benefit corporation. There are certain steps involved. So why go through all this?

Why is this important?

The “Public Benefit Purpose” is something that is important when thinking of a Benefit Corporation. A Benefit Corporation must include at least one of these stipulations to consider it beneficial: providing an income to underpaid individuals, helping out the environment, and so on. The company’s main goals would not only relate to income, but also how well they have provided to their cause.

Benefit Corporations show consumers how to better a business. They use their marketing and profits to help a poor society, they help to protect the environment, and to share profits amongst their company and shareholders.

Benefit companies have distinction from other companies. Legalities require published documentation of their sales, profits and contributions to society or the environment. This is called “transparency.” A benefit corporation may have the public’s best interest right in their name, or in their mission statement. Consumers will know right away the company not only values profit, but values the community and therefore contributes to the community.

Benefit companies also decrease in taxes. A start-up cost for a company can be reduced when the proposal of a benefit corporation is introduced. Strict and standard guidelines of benefit corporations help build the enterprise on a larger social, communal or environmental level.

Benefit corporations are growing in size and popularity. In a study conducted by J. P. Morgan, an estimated $400 billion to $1 trillion in investments of these enterprises are predicted.

How does a company become a Benefit Corporation?

Any company, start-up, or existing is able to become a Benefit Corporation. There are currently 30 states that have passed laws that recognize benefit corporations as businesses in the United States.

Existing companies have to receive 2/3 majority votes from the shareholders in order to amend the status of a business corporation.

DrinkerBiddle wrote a fantastic piece that outlines the general steps in becoming a benefit corporation. In short, a company looking to become a benefit corporation must:

1) Look at their taxes — depending on the tax rates, a company may switch to a benefit corporation without a significant increase.

2) Meet legal requirements — making sure a company has everything needed to not only be a corporation, but a benefit corporation. This means marketable profit and public benefit, as well as transparency and reports each year for sales.

3) Choose your state in which you want to register your company in — this one is fairly simple, if you live in one of the 30 states that recognize benefit corporations, you can start your business.

4) Choose the public benefits your company wishes to include — as well, decide what you want to include in your business and what job titles you may want.

5) Create a “due diligence review” of your company’s contracts — this is to ensure when your company switches over, it does so without consequence.

6) Prepare documentation — collecting all the documents needed to formally become a business corporation.

Benefit Corporations have wildly blown up across the United States. In 2010, only 12 states had passed laws that recognized Benefit Corporations as companies. Now, as of September 2015, 30 states have passed laws. This recognition and boom in positive material and benefits to communities have changed the ideas of businesses and marketing. Benefit Corporations require competitors to push past the idea of only pleasing or profiting a share-holder.


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