B Corp Non-Profit: Everything You Need to Know
A B corp non-profit is a benefit company that operates as a non-profit organization, which often comes with tax-exemption status.3 min read
A B corp non-profit is a benefit company that operates as a non-profit organization, which often comes with tax-exemption status.
What are Certified B Corps?
A certified B corporation, also called a B corp, is part of a global movement that includes people who want to use the force of business in a positive way. Most B corps are for-profit businesses and are located around the world. What sets them apart from other corporations is that they have received certification as benefit companies.
The non-profit organization, B Lab, certifies B corps that meet rigorous standards, including:
- Environmental performance
- Social performance
This certification for B corporations is similar to the USDA Organic certification for dairy products or the Fair Trade certification for coffee. Today, over 1,700 B corps exist across 42 countries and in more than 130 industries. This growing community of businesses works together toward a single goal, which is to redefine business success.
A non-profit organization can't be certified as a B corp, but it can use the assessment that is required for certification to determine what practices it can improve to become more beneficial to the community. Becoming certified as a B corp doesn't alter the company's tax status.
What Is a Benefit Corporation?
A benefit corporation is a legal way to create a foundation for a company's values and mission. By forming a company as a benefit corporation, you can protect the business and its mission through any changes to the leadership and phases of raising capital. This business formation also offers more flexibility as you consider liquidity and sale options and prepares the company to continue to move forward with its mission after going public.
In order to be classified as a benefit corporation, a business must meet the following criteria:
- Provide to the public an annual benefit report assessing overall environmental and social performance against a third-party standard (required in all states but Delaware).
- Have a mission that expands beyond maximizing the value of its shares, which must explicitly include specific and general benefits to the public.
- Consider and balance their business decisions with stakeholders and shareholders.
When a business becomes a benefit corporation, the investors and entrepreneurs have more of a choice when they determine which formation type is the best option for achieving the goals and objectives.
What Businesses Have Already Become Benefit Corporations?
Since the law around benefit corporations was passed in 2010 in Maryland, a variety of businesses have become certified. These incorporated businesses operate across many industries, such as:
- Food and beverage production
- Professional services
- Private education
B corps also come in a number of sizes, from single-person companies to massive international brands with hundreds of thousands of employees. Several of the most well-known examples of benefit corporations include:
- Laureate Education
- Plum Organics
- Solberg Manufacturing
- King Arthur Flour
Legislation around benefit corporations is in effect in more than half of the nation, with additional states working to pass legislation that allows for the formation and certification of these corporations.
Why Are Benefit Corporations Important?
In the U.S., the directors of companies operating for profit focus solely on maximizing financial returns when making business decisions. Although corporations can engage in any activity that is legal, including socially responsible activities, many leaders of these large companies are focused on creating value for shareholders rather than improving their social offerings in the communities in which they operate.
Socially conscious businesses that are driven by larger missions can impact social entrepreneurs and investors who are looking for something different than the sole focus on financial gain. Inflexible legal framework makes it difficult for profitable companies to focus on their missions and impacts on the communities. By expanding the obligations of the board of directors of a corporation to include consideration of social and environmental factors, businesses can still succeed financially while offering benefits to members of the public.
Officers and directors of a benefit corporation have the legal protection they need to consider the impact of their company on the environment and society, as well as pursue a larger mission.
Are Benefit Corporations Hybrid Non-Profits?
A benefit corporation is neither a hybrid non-profit or a non-profit organization.
If you need help with a B corp non-profit, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.