1. What Is a Benefit Corporation?
2. The Advantages of a Benefit Corporation
3. How to Become a Benefit Corporation
4. Optional Certification
5. Incorporating Your Startup as a Public Benefit Corporation

Are you wondering how to start a benefit corporation? You can form a new benefit corporation or convert an existing corporation into a benefit corporation in any of the states where benefit corporation legislation is in place.

What Is a Benefit Corporation?

A benefit corporation or a B Corp is a traditional, for-profit corporation that legally sets out a public benefit mission as its core business objective. Benefit corporations must base their decisions on creating a positive impact on the society. They cannot limit their scope to the wellbeing of their shareholders. Instead, they must consider the wellbeing of all stakeholders, including employees, workers, and the community.

Benefit corporations are becoming a popular type of structure for corporations that intend to provide measurable public benefits in addition to the objective of making profits.

Just like LEED and Fair Trade, B Corp is also a type of certification issued by a third party. A nonprofit organization called B Lab issues this certification after assessing a company based on certain social and environmental parameters. Companies go for this certification due to the credibility it brings to their organization by a third-party review.

Many states have enacted statutes to govern benefit corporations. In July 2013, Delaware also brought in legislation to regulate benefit corporations. This was an important development because Delaware is considered as a favorable state for setting up corporations.

The Advantages of a Benefit Corporation

Irrespective of the size of your business, you may consider converting it into a benefit corporation. A growing number of business attorneys are specializing in the field of benefit corporations.

Setting up a B Corp offers the following advantages:

  • Differentiation: Offering social benefits helps your corporation stand out from the competition.
  • Flexibility: It gives entrepreneurs and investors the flexibility to pursue social goals while making profits.
  • Liability Protection: Just like traditional corporations, benefit corporations also offer personal liability protection.
  • Competitiveness: It gives you an edge over your competition by making your business more attractive to consumers, workers, and investors.
  • Talent Attraction: Benefit corporations attract more employees due to the positive impact it creates on the environment and society.
  • Investment Attraction: Benefit corporations are an attractive investment option for both for-profit and nonprofit investors.
  • Societal Impact: B Corps offer the satisfaction of having a positive impact on the society. They promote the vision of doing business in a way beneficial to the community.

Electing a B Corp status lets you integrate your profits with social values without losing the liability protection benefit of a traditional corporation.

How to Become a Benefit Corporation

  • You can directly incorporate a new company as a benefit corporation if the state of incorporation has passed the legislation for B Corps.
  • To convert an existing company into a benefit corporation, you must amend its governing documents.
  • In most of the states, amending the governing documents requires a super-majority vote of two-third shareholders.
  • You must file the amendment with the state agency in the same manner as you would file any other change in the corporate structure. However, in this case, you must also add a statement to the effect that your company is a benefit corporation.
  • To register as a benefit corporation, you must file the Articles of Incorporation with the Secretary of State, along with the prescribed filing fees.
  • As of now, you can form a benefit corporation in 27 states. However, more states are likely to enact the statute for benefit corporations in the coming years.

Optional Certification

After incorporation, you can apply for B corporation accreditation from B Lab. This accreditation certifies that your company meets the rigorous standards of social and environmental accountability and performance. Note that obtaining certification from B Lab is not required to become a benefit corporation. However, obtaining the certification strengthens the credibility of your corporation.

B Lab is a nonprofit organization that has been pushing the enacting of benefit corporation legislation in various states.

Incorporating Your Startup as a Public Benefit Corporation

Incorporating your startup as a public benefit corporation allows you to include public good in your company charter while retaining the objective of earning profits for your shareholders.

There are about 4,000 public benefit corporations in the U.S., and these include some popular brands like This American Life, Kickstarter, and Patagonia. A growing number of startups are choosing to start as public benefit corporations.

If you need help with how to start a benefit corporation, 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.