Key Takeaways

  • A public benefit corporation (PBC) is a for-profit entity with a legally defined social or environmental mission.
  • PBCs must consider the impact of their decisions on both shareholders and broader stakeholders.
  • They differ from nonprofits by generating profits while also pursuing public good.
  • Converting to a PBC can help businesses attract socially conscious investors and consumers.
  • PBCs are legally required to produce benefit reports, enhancing transparency and accountability.
  • They offer flexible exit strategies and help preserve mission through leadership or ownership changes.
  • PBCs are recognized in over 30 states and Washington D.C., making them widely accessible in the U.S.

What is a Public Benefit Corporation?

A public benefit corporation is a corporation created specifically to benefit the public in some way. The focus is on both profit and mission alignment. A benefit corporation preserves a company's mission in the following ways:

  • Introduces capital increases and management modifications
  • Creates extra options when making choices about liquidation or selling
  • Prepares companies to focus on their mission after going public

Benefit corporations not only have the goal of profit maximization, but they also work to benefit the public in both general and specific ways. Benefit corporations must consider how their selections affect both shareholders and stakeholders.

Legal Characteristics of a Public Benefit Corporation

Public benefit corporations operate as for-profit entities but are legally obligated to pursue a specific public benefit in addition to profit. These benefits can be environmental, social, or community-focused. Key legal attributes include:

  • Dual Purpose: Unlike traditional corporations, PBCs must balance shareholder interests with the pursuit of a stated public benefit.
  • Accountability: Directors are legally required to consider how decisions impact shareholders, stakeholders, and the public benefit.
  • Transparency: Many states require PBCs to publish annual or biennial benefit reports evaluating their performance against their mission.

These legal requirements differentiate public benefit corporations from traditional corporations and help lock in the organization’s values as it grows.

Benefit Corporation Businesses

Many types of companies have grown to be benefit corporations after Maryland passed the first legislation allowing this type of business to be formed in 2010. Benefit corporations presently operating in America come from various industries, including the following:

  • Service
  • Retail
  • Tech
  • Manufacturing
  • Food and beverage manufacturing

Benefit corporations are available in many sizes, from worldwide brands to small businesses. Some famous benefit corporations are:

  • Kickstarter
  • Method
  • Plum Organics
  • Patagonia

Popular Public Benefit Corporation Industries

While any business can become a public benefit corporation, some industries naturally align with the model due to their social or environmental missions. Common sectors include:

  • Clean energy and sustainability
  • Ethical fashion and consumer goods
  • Health and wellness
  • Education and edtech
  • Agriculture and food transparency
  • Financial services with inclusive lending models

Companies in these sectors often benefit from increased consumer trust and investor interest when structured as PBCs.

Are Benefit Corporations Hybrid Nonprofits?

Benefit corporations are neither nonprofits nor hybrid nonprofits. Benefit corporations are for-profit corporations that need to consider stakeholders, morals, or missions in addition to making a profit for their shareholders. Nonprofits can't be benefit corporations, but they may create one. Due to the public benefit purpose provisions, expanded fiduciary duties of administrators, and extra shareholder rights created within the model benefit corporation laws, this structure may be helpful to operate and scale the earned-income activities of a nonprofit.

Does Being a Benefit Corporation Affect a Company’s Ability to Raise Capital?Benefit corporations are transferring into public and international markets. In December, Italy passed benefit corporation laws, making it the second country, after the U.S., to pass this type of legislation. B Lab stated that it's founding a Multinationals and Public Markets Advisory Council (MPMAC) to handle a variety of obstacles that are making it difficult for multinational publicly listed and personal companies to be considered a benefit corporation with B Corp Certification.

Unilever and Danone will soon become members of the MPMAC together with the following companies:

  • Harvard
  • Prudential
  • Campbell Soup
  • Grant Thornton
  • Telus
  • Bancolombia
  • C&A
  • SASB
  • Suncorp
  • Deloitte
  • Era Funding Administration
  • Hain
  • Linklaters

Key Differences Between PBCs and Nonprofits

Although public benefit corporations and nonprofits may seem similar in mission, they differ significantly in structure and legal status:

Feature Public Benefit Corporation Nonprofit Organization
Profit Distribution Allowed Not allowed
Ownership Shareholders No private ownership
Tax Exemption No Usually tax-exempt
Purpose Flexibility Public benefit + profits Primarily charitable
Reporting Requirements Benefit reports IRS Form 990 & others

PBCs offer a hybrid of profit generation and purpose without forfeiting equity ownership or investor returns.

Options When Selling

Changing into a benefit corporation provides companies with more sale options since they can:

  • Encourage competitors based mostly on dedication to mission along with value
  • Contemplate elements other than value when choosing if they want to sell and who they would sell to
  • Relinquish or retain benefit corporation standing before or after selling, relying on the present and new proprietors’ preferences and sometimes a two-thirds vote by shareholders

Mission Preservation in Leadership Transitions

When ownership or leadership of a public benefit corporation changes, the structure offers tools to protect the company’s mission:

  • Amendment Requirements: Changing the benefit purpose often requires a supermajority vote.
  • Transparency: Stakeholders can assess mission alignment through benefit reports.
  • Cultural Continuity: The legal structure helps maintain values through internal leadership changes or external acquisitions.

These safeguards make PBCs particularly attractive to founders who want to embed their company’s values into its long-term identity.

Is Going Public an Option?

Benefit corporations can go public. The benefit corporation category was implemented as a way to protect company missions when going public. No public benefit corporations currently exist. A public company named Natura was traded on the Sao Paulo Stock Exchange and reworked its articles to incorporate stakeholder commitments, much like the commitments discovered within the benefit corporation statute. Natura's institutional shareholders, together with Lazard, T. Rowe, and Oppenheimer, signed off on this official change.

Public Benefit Corporations and IPOs

While still rare, public benefit corporations can pursue initial public offerings (IPOs). Going public as a PBC can:

  • Attract investors who value environmental, social, and governance (ESG) performance.
  • Differentiate a company in a competitive marketplace.
  • Solidify a company’s long-term mission in a high-stakes environment.

Legal protections built into the PBC framework help ensure mission alignment is not diluted through the IPO process.

How Are the Financial Interests of Shareholders Protected?

All of the protections normally in a corporate model are available. Shareholders first have all normal company governance rights. Things like voting on company transactions like mergers or amendments and electing directors fall to them. Any transactions that result in conflict must go through a fairness evaluation any time there is a challenge. This ensures that administrators can't focus on their individual interests over the shareholders’ interests.

Is There Risk of Lawsuits by Third Parties?

Third parties would not be authorized to sue a benefit corporation until granted by the shareholders.

Legal Accountability and Compliance

Although third parties generally cannot sue a public benefit corporation for failing to pursue or create a public benefit, the company is still held accountable through:

  • Shareholder Enforcement: Shareholders can take legal action if directors fail to uphold the stated public benefit.
  • Reporting Obligations: Annual or biennial public benefit reports provide a compliance mechanism and promote transparency.
  • State Requirements: Some states may impose additional standards for measuring and reporting benefit performance.

These factors encourage responsible corporate behavior while shielding PBCs from excessive litigation risk.

Does Benefit Corporation Legislation Cost the State?

Benefit corporation laws don't cost the state. Such an entity is administered like any other company type, it's merely another company choice, and thus, there is no cost to the state. Nonetheless, some states have evaluated this type as an income generator as a result of the potential for the business development of their state.

State-by-State Availability and Growth

As of 2025, over 30 U.S. states and the District of Columbia have enacted public benefit corporation legislation. Each jurisdiction may differ slightly in:

  • Naming requirements
  • Reporting intervals
  • Shareholder approval thresholds
  • Required language in articles of incorporation

The widespread adoption of this model reflects a growing recognition that businesses can serve both shareholders and society. It also opens doors for entrepreneurs across the country to structure their companies with legally protected purpose.

Advantages in Attracting Impact Investors

Public benefit corporations appeal to a growing number of investors who seek both financial return and measurable impact. PBCs often have an edge in raising capital due to:

  • Mission Alignment: Attracts socially responsible investors (SRIs), impact investors, and ESG-focused funds.
  • Brand Trust: Enhances consumer loyalty and brand reputation, which can improve business performance and investment appeal.
  • Long-Term Vision: Investors looking beyond short-term returns appreciate the sustainable approach of a PBC.

Venture capital firms and angel investors increasingly view the PBC model as a way to align financial growth with ethical impact.

Frequently Asked Questions

1. What is the difference between a PBC and a B Corp? A public benefit corporation is a legal structure, while B Corp certification is a third-party designation by B Lab. A company can be both, but they are not the same.

2. Do public benefit corporations get tax breaks? No, PBCs are for-profit entities and do not receive the same tax exemptions as nonprofits.

3. Can a PBC still be sold or acquired? Yes. PBCs can be bought or sold like traditional corporations, but changes may require shareholder approval to preserve the mission.

4. Are benefit reports mandatory for all PBCs? Most states require PBCs to produce a benefit report annually or biennially, though specific guidelines vary.

5. Can startups register as PBCs from the beginning? Yes, many startups choose to incorporate as public benefit corporations to embed mission alignment from day one.

If you need help with your public 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.