When most businesses think about incorporating, they consider S corps, C corps or LLCs. But there’s an emerging alternative for business owners who want to tie their corporate goals to not just finances, but societal good.
The B Corp, officially called Benefit Corporation, is a legal structure that requires businesses to not only generate profits but also create social and environmental benefits.
Starting with Maryland in 2010, eight U.S. states now offer the B Corp structure and several more are considering legislation to adopt it. (A nonprofit called B Lab, which advocates for B Corp laws, also allows any business to be voluntarily certified as a B Corp.)
Some states have also adopted other similar types of corporate structures, including flexible purpose companies (FlexC) and low-profit LLCs (L3Cs). Check out this slideshow by Harvard adjunct professor Kyle Westaway to learn more about these different structures.)
Under the state laws, B Corps must include social and environmental goals in their bylaws and put out an annual report that explains how well they’ve performed those goals. It’s a way to ensure that the business is just as committed to generating social and environmental good as it is to generating profits.
As the B Corp structure gets more acceptance, more businesses are using it to show their commitment to environmental and social strong practices. Outdoor apparel company Patagonia incorporated as a B Corp in California early this year. Read this Wall Street Journal piece about several other companies that have as well.
Becoming a B Corp. offers several potential benefits to businesses that care about sustainable business practices. Here are a few to consider:
- Walking the talk. Being a B Corp. is another way to show your customers your genuine commitment to ethical business practices. Not only are you promising, but your legal structure requires it.
- Continuity of commitment. Once you’ve incorporated as a B Corp., you and future owners of your business will be bound to following the rules. It’s a way to ensure the commitment you’ve made to sustainable practices extends well into the future
- Standing out. Businesses with a B Corp structure stand out from competitors by showing a higher level of commitment to environmental or social responsibility.
All said, however, not everyone is convinced that B Corps are worth it. Environmental and social goals can certainly be attained without the B Corp structure. Some critics also worry how B Corps will be viewed by potential investors who might be looking at the financial implications of being a B corp.
What do you think about B Corps? Have you considered a B Corp structure for your business, or would you?
B Corp Photo via Shutterstock