Rachel Willy When you think about the word “corporation,” you probably think of a business entity that is all about making profits.
Corporations have been known to put profits above all else, which can have negative consequences for society.
However, there are also corporations that are driven by a higher purpose. These Certified Benefit Corporations (also known as B corporations) are businesses that have adopted a specific legal structure called the benefit corporation and are dedicated to creating a positive impact on society—not just in the short-term but for the long-term as well.
These kinds of corporations have numerous benefits for both company owners and investors. So, what exactly is a benefit corporation? Read on to learn more!
What Is a Benefit Corporation?
A benefit corporation is a type of company that is legally required to create a positive impact on society while also creating profits for shareholders. Think of it as a hybrid between a traditional corporation and a non-profit organization.
Whereas the traditional corporation is driven by profit, the benefit corporation is driven by the desire to create social and/or environmental benefits in addition to profits.
Any corporation that wants to be a certified benefit corporation must meet certain requirements. In particular, it must positively impact society as part of its core mandate.
An important thing to note is that benefit corporations can also be investor-owned. The company can sell shares to investors and raise capital from them. Unlike non-profit organizations, benefit corporations can also pay dividends on their profits.
It’s important to note. However, that benefit corporation is legally bound to meet certain requirements. Namely, the company must report on how it is creating social benefits and environmental benefits.
Why Incorporate as a Benefit Corporation?
Benefit corporations are designed to create long-term social and environmental impact and generate profits. This gives investors the peace of mind of knowing that the company they’ve invested in is doing good work.
Investors will also be more inclined to invest in a company that is committed to having a positive impact on society. This could lead to more investment opportunities and more investors. It could also help to create a good reputation for your company.
In addition, investors may be more likely to invest in your company if they know that they are making a positive impact on society by investing.
It’s important to note that there are legal benefits of incorporation as a benefit corporation. For one, there’s liability protection built into the benefit corporation structure. This means that shareholders in the company won’t be held liable for any environmental damage caused by the company.
Benefits of Benefit Corporations
Better for the Environment
In addition to creating a positive impact on society, benefit corporations are also legally bound to consider the environmental impact of their practices. They are required to maintain an environmental policy that addresses corporate sustainability.
Investors Feel Good About Investing
Benefit corporations are legally bound to make decisions that will create long-term impact. This means that they will focus on creating a positive impact on society and being environmentally sustainable, not just generating profits in the short term.
Stronger Brand Recognition
Benefit corporations are legally bound to positively impact society as part of their core mandate. This means that benefit corporation could actually have a leg up on other companies in terms of brand recognition.
Greater Access to Capital
Investors are more likely to invest in companies that are making a positive impact on society. This means you’ll have access to more funds to sustain business operations for the betterment of society.
How to Incorporate as a Benefit Corporation?
It is easy to incorporate as a benefit corporation. First, you’ll need to decide between two types of benefit corporations: public benefit corporations and nonprofit benefit corporations.
A public benefit corporation is a for-profit corporation that is required to create a positive impact on society and the environment. A nonprofit benefit corporation is a for-profit corporation that is required to create a positive impact on society but not the environment.
Next, you’ll need to adopt an official benefit corporation statement. The benefit corporation statement is a document that lays out the company’s mission and vision, as well as the types of the positive impact the company intends to create.
You’ll also be required to have a benefit corporation governance. The benefit of corporation governance lays out your decision-making and stakeholder engagement process. Once you’ve decided between a public benefit corporation or nonprofit benefit corporation, adopted the benefit corporation statement, and developed the benefit corporation governance, you’re ready to become a benefit corporation.
Summing It Up
With the rise of the impact investing movement and other innovative means of financing for social good, there has been a surge in demand for companies that have an added layer of benefit to society.
It’s not enough to give back or do good; these businesses have to have good as their primary goal with an added positive impact on society.
So, if you’re looking to incorporate a business to positively impact society, you should consider becoming a benefit corporation!
