What is a B-Corp? What is a Benefit Corporation? What’s the difference? - Lawyers for Nonprofit + Tax Exempt Organizations | Cullinane Law Group (2024)

B All That You Can B! Certified B Corporations

Many clients ask us about becoming a B Corp and whether it’s right for them.

We also hear a lot of confusion about the difference between a “B Corp” and a “benefit corporation.”

The B Corporation (or “B Corp”) is a relatively new certification and a way for entrepreneurs to identify their business as something more than just a for-profit endeavor. These social entrepreneurs want to use their business to do good and solve social and environmental problems. B Corp status is a certification process from a third-party business that recognizes the company’s commitment to certain sustainable practices.

What is the difference between a B Corp and a Benefit Corporation?

B Corps and Benefit Corporations are distinct terms that are often used interchangeably, but there are clear differences. In short,

• B Corp: a certification or “stamp of approval” by a third-party certifying company.
• Benefit Corporation: is a specific legal corporate structure within a state.

WHAT is a B Corp?

The B Corporation or “B Corp” is a certification issued by the organization B Lab Company to sustainable for-profit businesses that meet rigorous standards of social and environmental performance, accountability, and transparency. TheB Lab Company conducts an examination of the company’s policies and practices to determine social and environmental responsibility.

The B Lab Company sets out that B Corps represent “a better way to do business.” Some feel that the B Corp certification is to sustainable business what Fair Trade is to coffee, USDA is to milk, and LEED certification is to green building.

B Corporation certification addresses what many marketing experts are discovering: that consumers today don’t only care about the product, they also care about the company and the way it conducts business.

WHAT is a Benefit Corporation?

A Benefit Corporation is a distinct legal business entity available in certain states. It is a business entity formed similar to a corporation (Inc.), limited liability company (LLC), or limited partnership (LP) in the state of formation.

The benefit corporation differs from a traditional corporation in regards to its purpose, accountability and transparency.

Several states have a distinct corporate form that allows for the benefit corporation. Some include:Arizona (effective December 31, 2014),Arkansas (effective August 2013),California,Colorado (effective April 1, 2014),Hawaii,Illinois,Louisiana,Maryland,Massachusetts,Nevada (effective January 1, 2014),New Jersey,New York,Oregon (effective January 1, 2014),Pennsylvania,South Carolina,Vermont,Virginia, andWashington D.C.

(Read our articleDoing Good and Making a Profit – Benefit Corporationsto learn more).

Benefit corporations do not have to become certified – not by the B Lab company or anyone else. Benefit corporations and Certified B Corps are different.

WHO are B Corps?

According to B Lab (the certifying company), there is a growing community of Certified B Corps working together toward one unifying goal: to redefine success in business.

Some examples are Patagonia, Ben & Jerry’s, Etsy and Warby Parker Eyewear.

HOW can my company become a certified B Corp?

B Corp: To become a B Corp, an organization must be certified by B Lab and receive a certain score on the ratings system, agree to makecertain legal changes to its articles of incorporation, and remitan annual licensing fee to B Lab Company.

B Lab sets the standards for B Corporations and evaluates whether an organization is in compliance with the B corporation goals.

Note that B Lab requires specific legal requirements to become a B Corp. This may include changes to the Articles of incorporation, formation documents, bylaws, board resolutions and provisions for shareholders.

WHY should my company consider becoming a B Corp?

There are several reasons companies seek the B Corp seal:

• • • Identity: Many businesses want to differentiate their business as unique in their consumers’ mind. Consumers who know and understand the B Corp status may choose to do business with that company instead of others without the certification.
  • • Investment: Entrepreneurs want to command higher valuations, achieve greater impact, and build companies to last at scale with integrity. The B Corp legal and performance standards help ensure that B Corps and their investors meet all three of these objectives.
  • • Generate Buzz: B Corps have gotten press recently. CNN, The Wall Street Journal, Bloomberg Business, Inc., PBS, Esquire and The Motley Fool all highlight B Corps high impact as well as high growth.
  • • Protect Your Unique Mission: B Corps have core principles that they do not want to abandon. B Lab states it well: “The value of meeting the legal requirement for B Corp certification is that it bakes sustainability into the DNA of your company as it grows, brings in outside capital, or plans succession, ensuring that your mission can better survive new management, new investors, or even new ownership.”

Interested in learning more about B Corp certification?

Read our articleDoing Good and Making a Profit – Benefit Corporationsto learn more.

You may also like our article What is an L3C (Low-profit Limited Liability Company).

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