Many clients ask us about becoming a B Corp and benefit corporations.
The B Corporation (or “B Corp”) is a certification that some entrepreneurs use to identify their business as something more than just a for-profit endeavor. These social entrepreneurs want to use their business to do good and solve social and environmental problems. B Corp status is a certification process from a third-party business that recognizes the company’s commitment to certain sustainable practices.
What is the difference between a B Corp and a Benefit Corporation?
- B Corp: a certification by a third-party certifying company.
- Benefit Corporation: is a specific legal corporate structure within a state.
What is a B Corp?
The B Corporation or “B Corp” is a certification issued by the organization B Lab Company to certain for-profit businesses that meet certain standards of social and environmental performance, accountability, and transparency. The B Lab Company conducts an examination of the company’s policies and practices to determine social and environmental responsibility.
Some feel that the certifications like this are similar to certifications like “Fair Trade” is to coffee, USDA is to milk, and LEED certification is to green building.
Certifications like these address what many marketing experts are discovering: that consumers don’t only care about the product, they also care about the company and the way it conducts business.
What is a Benefit Corporation?
A Benefit Corporation is a distinct legal business entity available in certain states. It is a business entity formed similar to a corporation (Inc.), limited liability company (LLC), or limited partnership (LP) in the state of formation.
The benefit corporation differs from a traditional corporation in regards to its purpose, accountability, and transparency.
Many states have a distinct corporate structure that allows for the benefit corporation. Some: Arizona, Arkansas, California, Colorado, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Nevada, New Jersey, New York, Oregon, Pennsylvania, South Carolina, Vermont, Virginia, Washington D.C. and more.
Benefit corporations do not have to become certified – not by the B Lab company or anyone else. Benefit corporations and Certified B Corps are different.
Why should your company consider becoming a benefit corporation and/or seek a certification?
There are several reasons companies seek certification or a change in corporate structure:
- Identity: Many businesses want to differentiate their business as unique in their consumers’ mind.
- Investment: Entrepreneurs want to command higher valuations, achieve greater impact, and build companies to last at scale with integrity.
- Protect a Mission: For-good businesses have some similar core principles that they do not want to abandon.
Learn More:
You may also like our article What is an L3C (Low-profit Limited Liability Company).
