B Corp or PBC? They’re Not the Same Thing
Most high-growth companies incorporate as a C-Corporation, often in Delaware; however, there are other options. One alternative that has gained some popularity is the “public benefit corporation,” or PBC. While the statutory purpose of a C corp is to maximize shareholder value (often through profits maximization), a PBC is chartered to pursue a stated public benefit alongside shareholder value, and its directors are legally required to balance the two.
Confusingly, a PBC is not the same thing as a “Certified B Corporation.” The PBC is an entity form you elect in your certificate of incorporation under state law. B Corp certification is a credential granted by B Lab, a nonprofit that scores your company’s social and environmental performance and charges an annual fee to keep the badge. One is law. The other is a report card. You can be a PBC and never certify, and plenty of Certified B Corps are LLCs or ordinary C corps.
Should you consider a PBC? A certified B corp? Our startup lawyers can provide you with more information below, and we can speak with you today about entity formation questions for startups and moving forward with the initial steps of establishing your company.
What Makes a Business a Certified B Corporation?
What makes a business a certified B corporation? According to the United States Chamber of Commerce and the Small Business Administration (SBA), a certified B corp is “a for-profit corporation that is driven by both mission and profit.” In other words, “shareholders hold the company accountable to produce a financial profit as well as some sort of public benefit.” Certification means B Lab has verified the company’s social and environmental performance, accountability, and transparency. The legal duty to weigh mission against shareholder return comes from the entity form itself—the PBC—not from the certificate on the wall. Certified B Corps are businesses that earn a profit for shareholders but also give back to particular communities in some manner—to the public good.
Certified B corps are often those that contribute to environmental sustainability, social and economic justice, education, and human rights. Examples of well-known certified B corporations include but are not limited to:
- TOMS;
- Patagonia;
- Ben & Jerry’s;
- Bombas;
- Moodle; and
- Seventh Generation.
How Your Startup Can Become a Certified B Corporation
To become a certified B corp, businesses must meet numerous requirements, including:
- Be in operation for at least one year;
- Currently be a for-profit entity;
- Meet specific performance criteria;
- Meet environmental requirements; and
- Meet legal requirements.
The two concepts do meet in one place: B Lab requires certified corporations formed in states that offer the PBC form to adopt it within a set window after certifying. If your startup is considering B corp status, our firm can discuss this option and the specifics of the above requirements, as well as the possibility of “Pending B corp” status that may be beneficial to startups in particular.
Decide Whether B Corp Status Fits Your Mission
Is a certified B corp right for your startup? It certainly may be, depending on the nature of your startup company. If this is something you are considering, you should discuss the details with one of the startup attorneys at Triumph Law. Do not hesitate to reach out to our firm to have your questions answered about certified B corp status for startups and to learn more about how we can assist you with the process of becoming a certified B corp. Contact our firm today for more information.
Source:
uschamber.com/co/start/strategy/b-corp-advantages-and-requirements