November 19, 2018
Originally posted 2017-02-27 12:03:52
By Aurelia Mitchell Durant
On the question are B-Corp’s are better for business? It is clear that B-Corp’s are better for society. Over 26 states are changing the corporate landscape. These states capitalizing on one of the largest entrepreneurial and business booms of this decade. Most are familiar with the three, most prevalent, kinds of corporate formation structures in the U.S.; the C Corporation; the S Corporation, and the Limited Liability Company also known as the LLC. But 26 states, including the District of Columbia, have adopted a new form of business model; the B-Corporation. The B-Corporation represents a business model that promotes socially responsible investing, corporate social responsibility, and social entrepreneurship; while remaining profitable.
The Benefit Corporation or B-Corporation. B-Corp, for short, is a new form of incorporation, which still utilizes directors, shareholders, and officers much like a traditional corporation. However, B-Corps tend to stand out amongst their counterparts. B-corps comply with the “business judgment rule”, a rule governing the decision making of executives, but also consider the societal and environmental impacts of that decision. By voluntarily making these choices a company can focus on socially beneficial practices such as enhanced employee benefits and eliminating excess waste. These choices transcend normal standards of transparency, accountability, and performance, thereby promoting greater consumer trust, and better business practices. Important secondary effects are the creation of a higher quality of career opportunities, better communities, and employee morale surrounding the B-Corp.
B-corps still operate as a business, in that it generates profit, and provides shareholders protection from personal liability like an LLC, S or C corporation. However, B-corps can also enjoy the tax incentives of a non-profit organization. This allows the company to focus more on quality, and ethics, rather than quantity, or generating profit by mere means of supply and demand. In this way, B-corp functions as a “hybrid company” of sorts with the benefits as a non-profit and a for-profit entity.
Additionally, B-Corps can be certified by a 501(c)3 non-profit called “B Lab.” According to Joanne Fritz, Nonprofit Charitable Orgs Expert, and contributor to aboutmoney.com, “The B Lab Company sets the standards for B Corporations and evaluates whether an organization is in compliance with the B corporation goals.” She further states, to become a B corporation, an organization must be certified by B Lab, receive a minimum score of 80 (out of 200) on the B Ratings System, agree to make certain legal changes to its articles of incorporation, and finally, remit an annual licensing fee to B Lab. Certification comes with substantial benefits as well, such as substantial discounts to companies like Intuit and Salesforce. Certification also includes marketing and branding to consumers and investors, who are more likely to buy/invest if a third party is involved, and profitability by driving costs down through eco-efficiency.
Bcorporation.net states, “Over 1,000 businesses have already joined our community, encouraging all companies to compete not just to be the best in the world, but to be the best for the world. As a result of our collective success, individuals and communities will enjoy greater economic opportunity, society will address its most challenging environmental problems, and more people will find fulfillment by bringing their whole selves to work.”
It is clear that this new business model views businesses as the vehicle of change for the greater good of the world and a pathway towards the aggrandizement of social goodwill. So if you’ve always dreamed of starting a company that benefits the greater good, but still want the ability for significant revenue gain, a certified B-Corporation might be part of your vision.
If you would like to inquire more about the B-Corp, and its advantages for your business, please contact us at firstname.lastname@example.org and we’d be happy to assist.