Understanding The Ins and Outs of a Benefit Corporation

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By Kaleem Ullah

As the world continues to become less trusting and more conscientious, consumers have begun demanding that businesses act in ways that are not only beneficial to their bottom line, but also beneficial to society. 


As a result, a new kind of corporation has emerged—the benefit corporation. 


Now, you might be wondering, ‘what is a benefit corporation?’


While B Corps are not technically a new type of business structure, they are a new type of business responsibility. This “triple-bottom line” approach to business allows companies to “meet the needs of all constituencies, including shareholders, employees, customers, the community, and the environment.” 


To understand if this type of business structure is right for you, it helps to first understand what a benefit corporation is and what its about. Keep reading to find out more.

What Is A Benefit Corporation?

A benefit corporation (or B Corp) is a new type of entity that legally requires companies to pursue not just profit-maximization, but also benefits for all stakeholders. 


The idea is that businesses should not just seek to make money for owners but should also consider the impact on employees, suppliers, customers, the community, and the environment. B Corps are public benefit corporations, which means they are governed by a set of legal rules that are designed to promote public benefits, not just profits. 


Some states allow corporations with this designation to adopt special benefits known as “statutory benefits” or “end-benefits” so long as they also adopt special articles of incorporation. For example: In short, these corporations are hybrid entities with unique legal characteristics and fiduciary obligations. 

Why Incorporate As A Benefit Corporation?

There are a number of reasons why a company might want to incorporate as a benefit corporation. 


For starters, incorporating as a benefit corporation can help businesses attract and retain employees. According to research from Calvert, employees are four times more likely to stay with a company if it’s a B Corp than if it’s not. This can be especially important for startups that are competing for talent in a tight labor market. 


Additionally, incorporating as a benefit corporation can help a company attract investors, as B Corp investors are looking for long-term, sustainable business models. As a result, B Corp investors are often willing to overpay for shares in B Corp startups. 


Finally, incorporating as a benefit corporation is also a good way to set yourself up for success in the future. That’s because B Corp has been selected as one of 10 “strategic initiatives” by the Global Sustainable Investment Alliance. Working toward becoming a B Corp can help a business develop the types of practices and policies that will be necessary to survive and thrive in the future.


In Conclusion

Now that you know what a benefit corporation is and why incorporating as a benefit corporation can be advantageous for your business, it’s time to talk about how to actually go about doing it. 


First, you’ll want to make sure that your state allows benefit corporations. Next, you’ll want to make sure that your company is a good fit for this type of business structure. For example, it’s a good idea to have a board of directors who are willing to take on a broader fiduciary duty than would be required of directors of a traditional company. 


Once you’re certain that benefit incorporation is the right path for your company, you’ll want to make sure to include the proper language in your articles of incorporation, and you should be all set!