How to Form a Benefit Corporation.
- Select a business name.
- Form a board of directors.
- File articles of incorporation (also known as a certificate of formation) with the state and pay a filing fee. Your formation documents must specify ...
- Draft bylaws.
- Apply for business licenses.
- Register with tax agencies.
What should I know before forming a benefit corporation?
Before you decide to form a benefit corporation, check with your state's laws. Not every state recognizes benefit corporations, and some require additional paperwork and annual reports.
Can I Register my business as a benefit corporation?
Not available for every business: Not every type of business can register as a benefit corporation. For example, if you own a professional business, such as a law firm or an accounting firm, you likely cannot form a benefit corporation (you can instead form a professional corporation).
What is a a benefit corporation?
A benefit corporation is a new form of incorporation that is legally recognized in Maryland, Vermont, New Jersey, and Virginia. Other states moving forward in 2011 to pass benefit corporation legislation include New York, Pennsylvania, Michigan, North Carolina, California, and Hawaii.
Can you convert a for-profit corporation to a benefit corporation?
If the benefit corporation entity is available, you can form a new benefit corporation from scratch; and if you already have a for-profit corporation, you can convert it with the approval of your shareholders. In many ways, benefit corporations are similar to for-profit corporations.
What are the steps to forming a for profit benefit corporation?
How to Form a Benefit CorporationSelect a business name.Form a board of directors.File articles of incorporation (also known as a certificate of formation) with the state and pay a filing fee. ... Draft bylaws.Apply for business licenses.Register with tax agencies.
Can a small business be a benefit corporation?
Separately, many states now allow for a company to be organized as a formal “benefit corporation”, which is different from being a B Corp. A benefit corporation's by-laws require it to consider the social and environmental benefits of its actions.
What is an example of a benefit corporation?
Some examples of government-provided public benefit corporations include transit systems, public libraries, and hospitals.
Is a benefit corporation a legal entity?
A benefit corporation is a legal tool to create a solid foundation for long term mission alignment and value creation. It protects company missions through capital raises and leadership changes. Benefit corporation structure creates more flexibility when evaluating potential sale and liquidity options.
Why would a company want to be a benefit corporation?
Benefit Corporations afford legal protection to companies that prioritize social and environmental values over shareholder returns. In other words, Benefit Corporation status allows directors and officers to balance financial and nonfinancial interests when making business decisions.
How is a benefit corporation different from a nonprofit?
In a nonprofit, there are no owners or shareholders, while a B corp has shareholders. While a nonprofit works toward a public good without the intent of turning a profit, a B corp is a traditional company in that shareholders expect a return.
Who owns a benefit corporation?
The shareholders of a benefit corporation actually own the company as well as its assets. There are other significant differences between the two entities.
What are the pros and cons of a benefit corporation?
B-Corp Pros and ConsYou might have an edge when it comes to hiring talent. ... You'll earn extra publicity. ... Getting accepted is hard. ... There are no additional tax benefits from being a B Corp as opposed to more traditional corporations like an S Corp or an LLC. ... It's not available in every state.
Are public benefit corporations for-profit?
Public Benefit Corporations or “PBCs” are a type of for-profit corporate entity currently authorized by 35 states and the District of Columbia, similar to a C-corp, S-corp, or LLC.
What states allow benefit corporations?
Benefit corporation legislation has been introduced in the following states:Wisconsin.Texas.Ohio.North Carolina.New Mexico.Montana.Michigan.Kentucky.More items...
What is the difference between AB Corp and a benefit corporation?
These terms are often used interchangeably, without taking their remarkable differences into consideration. While the term "B Corp" refers to a third-party certification, "Benefit Corporation" refers to an actual legal business structure.
Why is a benefit corporation different than a traditional corporation?
Unlike a traditional corporation, a Benefit Corporation is a for-profit corporate entity type that is not solely profit-driven. A Benefit Corporation must have a beneficial social or environmental purpose and meet increased levels of accountability and transparency.
What is the purpose of a benefit corporation?
The mission of a benefit corporation is to create a general public benefit in addition to shareholder value.
Why do social entrepreneurs need a B corp?
For social entrepreneurs, a B Corp was created to help them specifically meet their needs , which is to scale their really good idea. But when they scale, they don't also want to lose control of their social mission, explains Gilbert. "Becoming a for-profit corporation helps them scale.
How many people are involved in social entrepreneurship?
Social entrepreneurship has grown to include an estimated 40 million people working worldwide to address the most pressing environmental, economic, and social challenges of our time. With so many companies claiming to be eco-friendly and socially responsible, it's becoming more difficult not just for consumers but for investors to separate ...
What are the advantages of being a B Corp?
Another advantage of becoming a B Corp is that you can pay people whatever salary you wish, allowing you to attract top talent. It's more than just your stakeholders understanding that there is a social component to the business; a B Corp is legally required to pursue that social mission, Gilbert says.
Why is social entrepreneurship important?
Indeed, social entrepreneurship provides a more compelling path. Community and environmentally minded business owners get to serve in a way that allows them to call their own shots, be innovative, and move quickly to respond to market demand in a way that was once only afforded to traditional businesses.
Why is B Corp important?
The big advantage of a B Corp over a nonprofit organization is the for-profit structure. As a for-profit benefit company you can attract outside investors that a non-profit organization cannot.
Is social entrepreneurship a career choice?
Over the last five years, social entrepreneurship has become more widely recognized as a career choice. "Most social entrepreneurs think of it as a vocation, it's their calling," says Gilbert. "It used to be, if people felt a call to serve they would go run a nonprofit or go serve in public office.".
How is a benefit corporation formed?
A benefit corporation is formed just like a traditional for-profit corporation by filing articles of incorporation with the appropriate state agency. However, benefit corporation articles of incorporation will include a statement of its social or environmental purpose.
How to convert an existing corporation to a benefit corporation?
Converting an existing corporation to a benefit corporation will typically involve filing amended articles of incorporation that add a beneficial purpose statement. This may require a two-thirds super-majority vote of shareholders. The fee for filing amended documents varies from state to state.
What is the difference between a benefit corporation and a nonprofit corporation?
A benefit corporation has two main advantages over creating a nonprofit corporation: The benefit corporation is much simpler to establish and can profit. It is a rather complex process to secure and maintain the tax-exempt status of a nonprofit.
What is the sole duty of a for profit corporation?
A traditional for-profit corporation's sole duty is to maximize profits for shareholders. Taking action to promote a social or environmental cause that does not serve profits could be considered a violation of this duty, subjecting the officers and directors to lawsuits by shareholders. A benefit corporation, which still operates for profit, ...
How many states allow benefit corporations?
If you wish to promote a social or environmental benefit as part of your company's purpose, consider creating a benefit corporation. More than 30 states, and the District of Columbia, allow benefit corporations. Additional states will likely be enacting benefit corporation laws in the future. To determine if your state allows benefit corporations, ...
What is the purpose of a stated beneficial purpose?
As stated above, the addition of a stated beneficial purpose allows managers to further that purpose without being subject to shareholder lawsuits for violating the duty to pursue profits. Attracting certain investors.
Why is it important for directors to sell a company?
With the sale of a traditional for-profit corporation, it is generally considered the duty of directors to obtain the highest price to maximize shareholders' financial interests .
What's your backstory and how did you come up with the idea?
When the BP Oil Spill happened in the Spring of 2010, I was living in NYC at the time and felt really helpless watching the spill unfold from afar without any end in site.
Since launch, what has worked to attract and retain customers?
We mostly use social media and newsletters to stay in touch with our customers. I have experimented with google and facebook ads, but have found it difficult to track the success honestly. I am just beginning to work with a company to create and optimize our facebook ads for us.
Through starting the business, have you learned anything particularly helpful or advantageous?
I think the biggest thing I’ve learned is when you feel stuck, don’t let yourself stay stuck. Little steps can help, ask a question, mention how you’re feeling / what your problem is to a fellow business owner or mentor.
What have been the most influential books, podcasts, or other resources?
How I Built This - I love hearing all of the different startup stories. Some of them are really inspiring and helpful,
Advice for other entrepreneurs who want to get started or are just starting out?
If you haven’t started yet, I recommend starting wherever you can. I know that it’s overwhelming and daunting, many people want everything to be ‘ready’ before they begin.
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Launching as a Benefit Corp Is Smart
Some entrepreneurs are advised by their lawyers to not incorporate as a benefit corp from the get-go, as in the case of Davis Smith, founder of B Corp outdoor-gear brand Cotopaxi. Smith wanted to write his mission into his bylaws and launch Cotopaxi as a benefit corp, but his attorney warned against it.
How to Handle the Legalese
Start with a legal team that understands why this is important to your business, and that knows how to get what you need done. B Lab has a list of attorneys ready and committed to guiding entrepreneurs (and existing businesses) through the legal ropes.
What is the purpose of a benefit corporation?
A benefit corporation is a business entity with a dual purpose: making a profit and promoting the public good. While a for-profit corporation's sole purpose is to make a profit for its shareholders, and a nonprofit's purpose is to fulfill its mission or support its beneficiaries (such as promoting environmental sustainability or serving low-income ...
What is a B corporation?
Many benefit corporations refer to themselves as "B" corporations in their marketing materials. A B corporation has applied to a nongovernmental, nonprofit business (called B Lab) for the right to use that phrase in its marketing materials. To obtain certification, the business pays membership dues and must pass an impact assessment, which scores the organization on environmental sustainability, community impact, and transparency. Certified "B" corporations get access to corporate discounts and may be included in B Lab's marketing campaigns. The "B" designation is more or less like the Good Housekeeping Seal of Approval.
Do benefit corporations report to shareholders?
Directors of benefit corporations must report to their shareholders (and in some states to the public) on how they are fulfilling their public benefit purpose. Benefit Corporations and "B" Corporations. Many benefit corporations refer to themselves as "B" corporations in their marketing materials.
Can a nonprofit corporation distribute profits?
By contrast, if you form a nonprofit corporation, you cannot distribute profits to the owners (apart from reasonable salaries). Attracting customers and employees: Benefit corporations can attract devoted customers and employees, who are drawn to the corporation's mission.
Is a benefit corporation a good choice?
A benefit corporation is not the best choice for every business. Some of the disadvantages you should consider include: Not available in every state: Not every state recognizes benefit corporations. If you cannot form a benefit corporation in your home state, you can explore out-of-state registration. Consult with an attorney to determine ...
Is a benefit corporation a for profit corporation?
In many ways, benefit corporations are similar to for-profit corporations. In both, the shareholders are the owners and the board of directors oversee the direction of the business. Both entities pay corporate income tax and file the same annual tax returns. As discussed below, the process for forming a benefit corporation is similar to a for-profit corporation.
What Is A Benefit Corporation?
Benefit Corporation vs. B Corp Certification
Benefit Corporation vs. Nonprofit Corporation
- A benefit corporation has two main advantages over creating a nonprofit corporation: The benefit corporation is much simpler to establish and can profit. It is a rather complex process to secure and maintain the tax-exempt status of a nonprofit. Benefit corporation taxation is the same as for any other for-profit corporation. There is no separate IRS classification for a benefit corporation…
Advantages and Disadvantages of A Benefit Corporation
- Compared with a traditional for-profit corporation, a benefit corporation has both advantages and disadvantages. Some things that are advantages in one way may be disadvantages in another. Benefit corporation advantages include: 1. Added officer and director liability protection. As stated above, the addition of a stated beneficial purpose allows managers to further that purpos…
How to Become A Benefit Corporation
- A new business can be formed as a benefit corporation, and an existing corporation can be converted to a benefit corporation. This needs to be done according to the state's laws where the business is incorporated. A benefit corporation is formed just like a traditional for-profit corporation by filing articles of incorporation with the appropriate ...