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B Corps vs. Benefit Corporations: Understanding The Differences

A B Corp and a benefit corporation are two business structures that have recently gained attention. Both provide benefits and limitations to a company. However, they’re not the same thing. 

B Corps are a type of business entity that is legally required to consider the impact of its decisions on society. B Corps are certified by the nonprofit B Lab, a private company that sets standards for what it takes to be considered a B Corp and issues B Corp certification.

Benefit corporations, also known as public benefit corporations (PBC), are another type of business entity that can be structured as either a C corporation or S corporation, with the aim of producing a public benefit. 

Like B Corps, public benefit corporations are also legally required to consider the impact of their decisions on society. While public benefit corporations must act in good faith, but they aren’t certified in the same way as B Corps.

Since these terms have become more prevalent in recent years, it’s important to understand B corps v.s. benefit corporations, their differences, and when one makes more sense than the other.

Both Are Good for Society

Both B Corps and benefit corporations are good for society. They both have similar goals, but they are not the same thing.

A public benefit corporation is a type of corporation that exists to provide a public benefit in addition to making profits. A B Corp is designed to create social and environmental benefits for all stakeholders, not just shareholders or owners. A PBC is still required by law to make money and operate like any other business would, but it’s also able to pursue its charitable goals without fear that pursuing those goals will hurt its bottom line or future profits.

B Corps vs. Benefit Corporations: Legal Rights and Limitations

In terms of legal rights, both B Corps and Benefit Corporations are given the exact same rights as a C-Corporation. This means that they have the same ability to raise money from investors, sell shares, pay dividends and buy back stock. They also have the same fiduciary duty to their shareholders and directors, meaning they are legally obligated to act in the best interest of their shareholders.

As for restrictions, the only difference between B Corps and PBCs is that public benefit corporations must operate in accordance with their corporate purpose (as defined by their charter) while B Corps may choose not to do so if it threatens profits or investor returns.

Public Benefit Statement

The public benefit statement, which is also called the “public purpose” or “benefit corporation purpose” statement, is a legal document that describes the company’s mission and how it will achieve that mission. This statement should be included in your annual report.

Transparency Requirements

Public Benefit Corporations do not have to make their compensation, lobbying and board of directors public. This can make it harder for the general public to hold them accountable.

B Corp’s must report their financials and lobbying activities on an annual basis. This makes it easy for investors and other stakeholders to track progress over time, as well as gauge whether or not the business is fulfilling its purpose in society.

B Corp is Third Party Certified

B Corporation is a third-party certified business that meets rigorous standards of social and environmental performance, accountability, and transparency. B Corps are for-profit companies that use the power of business to solve social and environmental problems. As a result, they deliver superior financial returns to investors while improving the lives of their workers, their communities and the environment.

The B Corp certification is a third party assessment of a company’s efforts to benefit society and the environment. This means that a third party body will look at your business from an outside perspective and evaluate it based on its social and environmental impact.

Benefit Corporations are Reliant on Self-Analysis

In some states, a benefit corporation is required to submit an annual report that details its impact on the community and planet. Although the assessment and report is not necessarily prepared by a third party, it still provides transparency into the company’s social and environmental impact.

In Conclusion

A B Corp is a for-profit company that uses the power of business to solve social and environmental problems. A B Corp is certified by the nonprofit B Lab, which has developed a rigorous set of standards for what it means to be a benefit corporation.

Benefit corporations are legally required to consider the impact their decisions will have on society and the environment in addition to their bottom line. They must also consider their impact on employees and local communities. In addition, they must be transparent about these impacts, making them more accountable than traditional businesses.

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