B Corporation FAQs

What is a Benefit corporation?

A Benefit corporation (B corp) is a new class of corporation created to serve a beneficial public purpose, while pursuing a profitable bottom line. Unlike a traditional corporation, which is operated solely to profit its shareholders, a Benefit corporation must balance shareholders’ interests with achieving the business’s clearly stated social mission.

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Does every state permit Benefit corporations?

No, currently 27 states permit the formation of Benefit corporations. Many other states are considering Benefit corporation statutes, so expect this number to grow in the coming years.

States that have adopted Benefit Corporation legislation
Arizona (1/1/15)
Minnesota (1/1/15)
New Hampshire (1/1/15)
New Jersey
New York
Rhode Island
South Carolina
Washington, D.C.
West Virginia

States in which legislation is pending or under consideration
North Carolina
Puerto Rico
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Who should form a benefit corporation?

Anyone who wants to be able to make a profit from the business, but who also wants to distinguish themselves as a business with a social conscience (beyond creating jobs) should consider a Benefit corporation. In addition, operating as a Benefit corporation increases a company’s appeal to the significant number of individuals who prefer to buy from (or work for) socially responsible companies. There is also an increasing amount of investment money available to companies that are socially responsible.

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Do the Articles of Incorporation have any unique requirements for a Benefit corp?

Most of the information is the same that would be required of any corporation (names of incorporators, principal location, name and address of registered agent). The main difference is the Articles must also state that the corporation is formed to provide for a general public benefit. Many states allow the Articles to state one or more specific public benefits (Delaware requires a statement of specific public benefit). In most states, the heading must also state that it is a Benefit corporation.

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Are there special reporting requirements?

Yes, forming a Benefit corporation means your business must meet additional reporting and governance obligations. Depending on the state of incorporation you may be required to appoint a “Benefit Director” to ensure that the corporation meets its stated public benefit or purpose.

Benefit corporations must file a benefit report that uses a third-party standard (as offered by B Lab) to assess the company’s performance regarding to its public purpose(s). Most, but not all, states require that this report be completed annually and made available publicly.

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Can I change from a traditional corporation to a Benefit corporation?

If you are incorporated in a state that authorizes Benefit corporations, yes, you may change from a traditional corporation to a Benefit corporation.

If you are incorporated in a state that has not passed Benefit corporation legislation, you have the option of changing your current corporation's home state or forming a new corporation in a state that allows Benefit corporate status.

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What is the difference between a non-profit and a Benefit corporation?

A non-profit organization is operating solely for some type of charitable or public purpose. There are no shareholders and no private benefits can flow to individuals who control the non-profit. Private benefits would cost the non-profit its tax-exempt status. However, a Benefit corporation is expected to earn profits and is owned by shareholders; therefore, a Benefit corporation is not able to claim tax-exempt status.

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Are “Benefit corporation” and “B corp” the same terms?

A Benefit corporation is often referred to as a “B corp,” but it is important to make a distinction between a “B corp” and a “Certified B Corp.” A B corp is formed under state law similar to any corporation. A Certified B Corp is a company that has been certified by the non-profit organization B Lab after having formed with the state. It is not necessary for a company to be certified by B Lab in order to be a Benefit corporation.

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What is a “public purpose”?

A Benefit corporation must be operated to achieve a general public purpose, as well as to generate profits for the shareholders (Colorado and Delaware require a specific public purpose). Most states define a general public purpose as one that has a material, positive impact on society or the environment, as measured against an independent third-party standard such as B Lab.

States that require a general public purpose also permit the corporation to adopt one or more specific public purposes. Among the specific public purposes that might be permitted are:

  • Improving human health
  • Increasing capital flow to entities that have a general public benefit (impact investing)
  • Promoting economic opportunities for individuals or communities (other than merely creating jobs in the business)
  • Promoting the arts, sciences or advancement of knowledge
  • Protecting or restoring the environment
  • Providing goods or services to low-income/underserved individuals or communities

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Are there state reporting responsibilities that are specific to Benefit corporations?

Yes, although there are many upsides to operating as a Benefit corporation, there are additional compliance and governance obligations. Most states require that publicly traded companies have a “Benefit Director” who is responsible for ensuring that the corporation meets its stated public purpose. Some states require all Benefit corporations to have a Benefit Director.

In addition, Benefit corporations must file a Benefit Report that uses a third-party standard (such as the one promulgated by B Lab) to assess the company’s performance with regard to its public purpose(s). Most states require that the report be completed annually and made available publicly. (Delaware is an exception. It requires a biennial report and does not require it to be publicly available.)

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Is there an advantage to becoming a Certified B Corp?

There are definite advantages to obtaining Certified B Corp status. Although B Lab certification is not required to operate as a Benefit corporation, there are significant advantages to obtaining it. Certification establishes that your company meets rigorous social and environmental performance, accountability and transparency standards. This eases the burden of Benefit Reporting and signals that your company is socially responsible and committed to serving the public good.

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Who can be a shareholder in a Benefit corporation?

There are no restrictions on who can be a shareholder in a Benefit corporation. However, if you plan to make an S corporation election, you must comply with those restrictions.

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What legal documents are required to form a Benefit corporation?

A Benefit corporation is a corporation, so it is formed by filing Articles of Incorporation in the state that the incorporator selects.

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Are there rules for naming a benefit corporation?

Yes, there are two sets of rules that apply when selecting a name for a Benefit corporation.

  1. The normal naming rules in the state apply. In almost every state, this means that a name cannot be the same or substantially similar as the name used or reserved by any other corporation in the state. Also, most states prohibit the use of certain words or phrases.
  2. The name must include a designator that identifies it as a benefit corporation. Most states require the words “Benefit Corporation” or “Benefit Corp.” (Delaware requires the words “Public Benefit Corporation” or “PBC.”)

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Do I need a registered agent for my Benefit corporation?

Yes, all Benefit corporations must appoint and maintain a registered agent in the state of incorporation. If the Benefit corporation registers to do business in other states (also known as a foreign qualification), it must appoint and maintain a registered agent in those states as well.

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Do I need an lawyer to incorporate as a Benefit corp?

No, you do not need an attorney to complete and file the required paperwork, but consulting with an attorney to determine the best business and capital structure of the company is wise.

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Does a Benefit corporation have “perpetual existence”?

Yes, by default a Benefit corporation has perpetual existence.

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What happens after incorporation?

After incorporation, you must hold the required meetings of shareholders and directors to adopt bylaws and issue stock.

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Can a B corp be an S corp?

Yes, Benefit corporations are creatures of state law, while S corporation status is a federal tax election. If the corporation meets the requirements to be an S corporation, which include restrictions on the type of shareholders and the one class of stock requirement, a Benefit corporation can elect to be taxed as an S corporation.

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