The goal for most for-profit companies is to maximize profits for shareholders and investors, which usually means they are not legally able to take various other factors into consideration (including factors that may not be financially motivated). More businesses are making an effort to not only create value for its shareholders but also pursue social objectives. Social enterprises often take on various forms.
There is often confusion between a benefit corporation and a Certified B corporation (“B Corp”) due to the similarities. However, a B Corp is a term that is used for any for-profit entity that is certified by B Lab, which is an independent non-profit organization. In order to get certified as a B Corp, you must pass an assessment test and pay membership fees based on your annual revenues, which support the activities of B Labs. A company that is certified as a B Corp must be monitored regularly and meet higher standards of transparency, accountability and performance. B Corp certification is voluntary and can be changed at any time.
By contrast, a benefit corporation is a legal entity organized by certain states, which enables business owners to set forth both fiduciary and social responsibility. Not all states have approved the benefit corporation structure. Many states that have adopted the benefit corporation structure have a requirement to define the purpose of the benefit corporation to include a material positive impact on society and the environment. Although state laws vary, benefit corporations must typically prepare a description for selecting a third party standard and provide information to the public of its benefit report.
Some companies choose to be either incorporated as a benefit corporation or certified as a B Corporation, while other companies choose to do both. Engage your team, accountants and legal advisors to evaluate the pros and cons to make an informed decision.
Melody Ashby is a Senior Attorney at Meyer Law, a woman-owned, forward-thinking boutique law firm specializing in helping entrepreneurs and technology companies from startups to fortune 500’s with corporate, contracts, employment and intellectual property matters in Technology, Telecom, FinTech, EdTech, AdTech, HealthTech, Internet of Things, Financial Services, Telecom, Social Media, Real Estate, Marketing, Advertising and Healthcare sectors. Melody is a mentor at tech incubators and accelerators across the United States. Learn more at www.MeetMeyerLaw.com and follow us on Twitter @TheTriciaMeyer and @LoveYourLawFirm.