Benefit Corporations
Benefit Corporations versus Certified B Corporations
Benefit corporations should not be confused with Certified B Corporations, even though both are sometimes called “B Corps.” Benefit corporations are an entity type created by the relevant state whereas Certified B Corporations are a private designation bestowed by a nonprofit organization called B Lab for a fee. Some benefit corporations, like Patagonia and Kickstarter, are also Certified B Corporations, but benefit corporation statutes do not require certification by B Lab. Further, B Lab will certify traditional for-profit business types such as limited liability companies, S-Corporations, and C-Corporations, along with benefit corporations.
Benefit Corporation Variations
The benefit corporation form is the most popular social enterprise entity type in the United States. Some version of benefit corporation legislation has been passed in well over 30 states and the District of Columbia with Maryland’s 2010 statute being the earliest. Two major models for benefit corporation statutes have emerged: the B Lab Model and the Delaware Model. Delaware calls its benefit corporations “Public Benefit Corporations” (PBCs). The B Lab Model existed first, and the vast majority of benefit corporation laws have been based on some version of this model legislation. Instead of working from the B Lab Model, Delaware legislators went in a different direction with some attention to early legislative efforts in Colorado. Colorado’s early legislative efforts stalled, but after the passage of the Delaware’s PBC law Colorado finally passed a similar statute.
Purpose
Due to cases like eBay v. Newmark (which appears at the end of this unit) some proponents of benefit corporations have questioned whether C-corporations are flexible enough to accommodate businesses that veer away from a shareholder wealth maximization purpose. Given this uncertainty in the C-corporation form, benefit corporation statutes make clear that social purposes are allowed, and even required. Statutes following the B Lab Model require a broad social purpose for benefit corporations. Specifically, the B Lab Model defines the required “general public benefit” as “[a] material positive impact on society and the environment, taken as a whole, from the business and operations of a benefit corporation assessed taking into account the impacts of the benefit corporation as reported against a third-party standard.” In contrast, the Delaware Model requires “one or more specific public benefits” in the certificate of incorporation (emphasis added). The broader statement of the B Lab Model and the narrower purpose allowed by Delaware is a major difference between the two models. Some Delaware PBCs, however, have reportedly used the B Lab general public benefit statement as their specific purpose, muting the differences. Delaware also has some general purpose language elsewhere in its statute, including a statement that PBCs are intended