Currently, in 28 jurisdictions including Nebraska, Benefit Corporation status exists as an option for forming a legal corporate entity. This is distinguished from B-Corp. status, which is a certification by B-labs, a 501(c)(3) organization. Although the purpose and intent of the certification and the legal status are similar, each have important differences.
A Benefit Corporation is organized under the laws of the state and requires the company to make decisions that benefit the shareholder, the employees, and society at-large. In Nebraska, for example, the state officially started recognizing this form of corporate entity in April, 2014. If elected, the corporation must have a general public benefit as measured by a third party standard and meet transparency and accountability requirements. It is expected that the volume of states recognizing Benefit Corporation status will grow.
Electing Benefit Corporation status means society and the public will benefit, generally, in accordance with the intent of the founder. More importantly, should the owner/founder leave the company or somehow no longer be in charge, the company will be required to consider the societal benefit aspects of the company in their decision making.
B-Corp status, on the other hand, requires a certification process by B-labs. The certification process varies depending upon the size of the company, but includes a company assessment and a fee. This allows the company to advertise their B-Corp status and show that they are looking beyond the shareholder profit motive, to a larger, moral and societal perspective regarding their company.
Although becoming B-Corp certified is distinct from using Benefit Corporation as a legal entity, they both encourage a broader, societal perspective in corporate decision making. Depending upon the specific organization contemplating one of the two options, a careful review of the requirements for each will ensure a proper selection.
© 2015 Houghton Vandenack Williams
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