No, you aren’t having Déjà vu – we’ve done a business basics on B-Corps before. However, we decided to revisit the benefit corporation because there are still so many question surrounding the new structure. In just a few short months, eight more states have enacted legislation to recognize benefit corporation, bringing the total up to twenty, if you include D.C. And, as more and more people weigh the pros and cons of forming a B-Corp, the inevitable question of ‘how do you even run one of these things?’ is bound to come up. Happily, running a B-Corp isn’t much different than running any other type of corporation.
Apply for B-Corp Recognition
As with any corporate formation, you are going to have to file an Articles of Incorporation, which typically has to include the corporate name, the details of your officers and directors, your registered agent’s name, and the purpose for your formation. The key difference will likely be what you put for your purpose. Unlike a C or S Corp, a Benefit Corporation must pursue a specific public benefit or good. Some states have you fill out what benefit you will pursue right in the Articles of Incorporation, others ask that you attach a statement. Either way, you will have to clearly define your goals as a B-Corp. Remember to put a lot of thought into your purpose as well, as your stated purpose will be what your effectiveness as a B-Corp is based on.
Pursue a Public Good, along with Profit
After you define the public good you wish to pursue, you need to actually pursue it. So far there aren’t any real fiscal incentives for a company to form a Benefit Corporation – no tax breaks, guaranteed contracts, or preferential treatment. So there aren’t going to be a lot of companies trying to abuse the title. Still, some may attempt to use a B-Corp status as a greenwashing tactic, so it is important to set yourself apart from the corrupt and clearly pursue the good you said you would. At the same time, however, you are running a corporation, and you also have to pursue a profit. You still have some fiduciary duties to your investors, and you will need money to continue to run. You’re just able to make decisions with the public good in mind, even when it gets in the way of profit.
In order to continue to qualify B-Corp status, you are going to have to complete a transparency report that analyzes how well you fulfilled your public mission, according to a third party standard. You must then share that report with all shareholders and post it publicly on your website. If either your shareholders or directors feel you haven’t pursued the corporation’s mission adequately, they have a right to action, so do not shirk your responsibility as defined in your benefit statement. A large part of successfully running a benefit corporation is, understandably, working to benefit the public, so that must remain a top priority.
Benefit corporations are a wonderful structure because they protect business owners that want to incorporate, but don’t want to give up on their original mission to help other people or the environment through their business. Normally profits trump all else in the corporate world, but B-Corps offer another option. If and when you do create a B-Corp, remember, though, that you need to treat your pursuit of the public good like you would treat the pursuit of profit. You will need both if you want to run a successful benefit corporation.