Increasingly, you’ll hear about big companies using their profits for social good or to help the environment. Time listed the “best corporations” in 2023; the ranking included sustainability. Among these corporations were Microsoft, Apple, Alphabet (Google), Meta (Facebook), Accenture (in Ireland), Pfizer, and American Express. But you don’t have to be a giant corporation to benefit your community, your environment, and special causes.
If your business is focused on doing good, you may want to use a special designation to tell the public about it. You may have heard some companies refer to themselves as benefit corporations, or B corporations. These words mean something; they’re not arbitrary. Understand your options so you can decide if this makes sense for you.
Overview of benefit corporations
As of February 2023, more than half the states and the District of Columbia permit benefit corporations in their jurisdictions, and others are considering it. Benefit corporations are for for-profit companies committed to having a positive impact on employees, the environment, the community, and society; officers and directors must consider these stakeholders in their business decisions. Companies incorporate as benefit corporations, which protects officers and directors from certain investor lawsuits and tells the public that they’re committed to societal benefit programs. Benefits corporations focus on the 3 P’s: people, planet, and profits. The key attributes of a benefit corporation are:
- Public benefit programs conducted to create a material impact on society and the environment.
- Transparency and reporting to provide an annual review of its conduct. When no audit is required, performance is measured against a third-party standard to assess their creation of a general public benefit.
- Benefit enforcement to entitle shareholders to sue in order to hold the corporation accountable for its public purpose.
Benefit corporations do not have any special tax treatment. Thus, they may be an S corporation or a C corporation, with the tax treatment that follows these entities.
There are state filing fees for becoming a benefit corporation. Instead of “inc,” “corp,” or “ltd,” a benefit corporation uses the designation PBC (public benefit corporation). They can be public or privately held; there’s no asset or revenue limits or requirements. A well-known PBC is Kickstarter, and others include Eileen Fisher, Etsy, and Hootsuite.
Benefit corporation versus B corporation
Do not confuse benefit corporations with B corporations. B corporations are corporations certified by B Lab, a non-profit organization, to show they meet standards for social and environmental performance, accountability, and transparency. The “b” stands for benefits. This certification can be used by a corporation in any state, whether or not it incorporated as a benefit corporation. An example of a well-known B corporation is Bombas, the sock company with a mission to donate to the homeless (one pair of socks donated for each pair purchased).
The cost for B certification ranges from $500 to $50,000, depending on the business’s revenue.
There are also “social enterprises,” which are for-profit (or non-profit) businesses using any legal structure that has a business model addressing unmet basic needs in society. Social enterprises are prevalent throughout the world; there are some in the U.S. An example in the U.S. is Baron Fig, which manufactures notebooks and other items sold to promote environmental awareness (one tree is planted for each notebook sold). More information about these businesses can be found from the Social Enterprise Alliance, a membership organization.
Some states, including Delaware, Kansas, Illinois, Maryland, Oregon, Pennsylvania, and Utah, allow for benefit LLCs. These are limited liability companies obtaining the same opportunities that the state’s benefit corporations enjoy. They are sometimes referred to as public benefit LLCs (PBLLCs).
Is a special designation right for your company?
What is the mission of your business? Hopefully, you’ve drafted a mission statement that spells out your aspirations. If a significant reason for being in business is for a public benefit, then a benefit corporation may help you attract employees, customers, and investors that align with your beneficial purpose. But keep in mind that being a benefit corporation means having to demonstrate you are fulfilling your benefit purpose. An annual benefit report typically is required.
You can make a profit while still doing good. Consider a special designation if this aligns with your mission statement. Alternatively, consider charitable donations and enabling volunteering by employees to benefit needs in your community without company having any special designation.
As Theodore Roosevelt said: “Far and away the best prize that life offers is the chance to work hard at work worth doing.”