{"id":11650,"date":"2018-10-04T19:39:12","date_gmt":"2018-10-04T19:39:12","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/?post_type=chapter&#038;p=11650"},"modified":"2024-05-07T16:47:57","modified_gmt":"2024-05-07T16:47:57","slug":"benefit-corporations","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/chapter\/benefit-corporations\/","title":{"raw":"Benefit Corporations","rendered":"Benefit Corporations"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Explain the purpose and requirements of a benefit corporation (B corp)<\/li>\r\n \t<li>Discuss the advantages and disadvantages of corporations<\/li>\r\n<\/ul>\r\n<\/div>\r\nOver the past few\u00a0decades, the boundaries between the public (government), private (business), and social (nonprofit) sectors have become blurred, as many pioneering organizations merge\u00a0social and environmental aims with business approaches. There are many expressions of this trend, including corporate social responsibility, microfinance, venture philanthropy, sustainable businesses, social enterprise, privatization, community development, and others. There are also new forms of corporate entities. One of the most widely established is the<strong> benefit corporation (B corp)<\/strong>. In the U.S., a benefit corporation is a type of for-profit corporate entity, authorized by thirty U.S. states and the District of Columbia,\u00a0that includes positive impact on society, workers, the community, and the environment\u2014in addition to profit\u2014as its legally defined goals. <em>Benefit corporations differ from traditional C corporations in purpose, accountability, and transparency, but not in taxation.<\/em>\r\n\r\nIn April 2010, Maryland became the first U.S. state to pass benefit corporation legislation.\r\n\r\n<img class=\"alignright wp-image-8218\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/11\/01225746\/9403769706_c6db2857a6_k.jpg\" alt=\"decorative image\" width=\"350\" height=\"233\" \/>The purpose of a benefit corporation is to create <strong>general public benefit<\/strong>, which is defined as a material positive impact on society and the environment. A benefit corporation\u2019s directors and officers operate the business with the same authority as in a traditional corporation, but they are required to consider the impact of their decisions not only on shareholders but on society and the environment, too. In a traditional corporation, shareholders judge the company's financial performance; with a benefit corporation, shareholders judge performance based on the company's social, environmental, and financial performance. Transparency provisions require benefit corporations to publish annual benefit reports of their social and environmental performance using a comprehensive, credible, independent, and transparent third-party standard.\r\n\r\nSome well-known examples of benefit corporations are Kickstarter, Patagonia, and King Arthur Flour.\r\n<h2>Forming a Benefit Corporation<\/h2>\r\nNew companies can incorporate as a benefit corporation in any state where benefit corporation legislation has been passed. (Instead of recognizing benefit corporations, Washington created social purpose corporations in 2012 with a similar focus and intent.) The\u00a0process varies\u00a0by state, but many states require benefit corporations\u00a0to do the following:\r\n<ul>\r\n \t<li>declare a commitment to creating general public benefit<\/li>\r\n \t<li>adopt a third-party standard<\/li>\r\n \t<li>prepare an annual benefit report<\/li>\r\n \t<li>distribute the annual benefit report to the owners and post it on the company's website<\/li>\r\n<\/ul>\r\n<h2>B Corp Certification<\/h2>\r\n<span style=\"color: #333333;\">Businesses that want to take their social and environmental commitment even further can become a Certified B Corporation. This involves a rigorous assessment process by B Lab, which uses a survey to\u00a0rate a company's environmental practices, employee treatment, activism within its community, and other factors. Businesses that surpass a certain score are certified by\u00a0B Lab, which then audits them from time to time to ensure that they are living up to the movement's standards.<\/span>\r\n<blockquote><span style=\"color: #333333;\">[B Lab certification] is like a Good Housekeeping seal of approval,\" said David Murphy, former CEO of\u00a0<a style=\"color: #333333;\" href=\"http:\/\/www.betterworldbooks.com\/\" target=\"_blank\" rel=\"noopener\">Better World Books<\/a>, in a 2011 Business News Daily interview.\u00a0\"If your company is a Certified B Corporation, that really says something. You're there to serve all those stakeholders, and you're willing to prove it.[footnote]Fallon, Nicole. \"Becoming a Benefit Corporation: Is it Right for Your Business?\" Business News Daily. January 22, 2016. <a href=\"http:\/\/www.businessnewsdaily.com\/8734-benefit-corporation.html\" target=\"_blank\" rel=\"noopener\">http:\/\/www.businessnewsdaily.com\/8734-benefit-corporation.html<\/a>[\/footnote]\u00a0<\/span><\/blockquote>\r\n<h2>Benefit Corporation Taxes<\/h2>\r\nBenefit corporations are treated like all other corporations for tax purposes. B corps elect to be taxed either as a C or S corp.\r\n<h2>Disadvantages of a Benefit Corporation<\/h2>\r\n<ul>\r\n \t<li><strong>Transparency and Reporting Requirements<\/strong>. Benefit corporations must provide\u00a0an annual benefit report according to a third-party standard (such as B Lab) and make the report available on their company websites. The purpose of this is\u00a0to assess the company\u2019s performance with regard to its public purpose(s).<\/li>\r\n \t<li><strong>Annual Fees to Retain Certified B Corp Status.<\/strong>\u00a0If a B corp elects to receive certification from a third party, such as B Lab, fees for \"certified\" B corp status are\u00a0based on annual sales, with a minimum of $500. To keep certification, the company must pay a renewal fee each year and recertify every two years.<\/li>\r\n \t<li><strong>Compliance and Governance Obligations<\/strong>. Most states require publicly traded companies with a\u00a0B corp designation to have a \u201cbenefit director\u201d who is responsible for ensuring that the corporation meets its stated public purpose.<\/li>\r\n<\/ul>\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Question<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/859d5ed7-e008-41ce-9293-aa2e356c0e89\r\n\r\n<\/div>\r\n<h2>Advantages of a Benefit Corporation<\/h2>\r\n<ul>\r\n \t<li><strong>Protection of Mission<\/strong>. Becoming a benefit corporation gives companies more options and protections if they decide to sell the\u00a0business to someone else or take it public, because other factors besides price (e.g., the public benefit mission) must also be taken into account.<\/li>\r\n \t<li><strong>Reputation<\/strong>. Incorporating\u00a0as a benefit corporation allows companies to stand out\u00a0as businesses that have a\u00a0social conscience and aspire to a standard they consider higher than maximizing profit\u00a0for shareholders. For investors and consumers who are committed to social and environmental responsibility, benefit corporations provide additional\u00a0choices.<\/li>\r\n \t<li><strong>Creation of Value<\/strong>. Because it's committed to considering other stakeholders' interests, a benefit corporation may create value via\u00a0employee engagement and customer loyalty, thereby improving results\u00a0for all stakeholders\u2014including the owners\/shareholders. As well, certain profit-making opportunities may not be available without an assured commitment to other stakeholders.[footnote]\"Benefit Corporations: Frequently Asked Questions.\" BLab. <a href=\"http:\/\/benefitcorp.net\/sites\/default\/files\/FAQs%20Directors%20and%20Officers_6_17.pdf\" target=\"_blank\" rel=\"noopener\">http:\/\/benefitcorp.net\/sites\/default\/files\/FAQs%20Directors%20and%20Officers_6_17.pdf<\/a>[\/footnote]<\/li>\r\n<\/ul>\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Question<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/5f5e9733-4a1e-4d54-98fa-4a6329b0d1eb\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Explain the purpose and requirements of a benefit corporation (B corp)<\/li>\n<li>Discuss the advantages and disadvantages of corporations<\/li>\n<\/ul>\n<\/div>\n<p>Over the past few\u00a0decades, the boundaries between the public (government), private (business), and social (nonprofit) sectors have become blurred, as many pioneering organizations merge\u00a0social and environmental aims with business approaches. There are many expressions of this trend, including corporate social responsibility, microfinance, venture philanthropy, sustainable businesses, social enterprise, privatization, community development, and others. There are also new forms of corporate entities. One of the most widely established is the<strong> benefit corporation (B corp)<\/strong>. In the U.S., a benefit corporation is a type of for-profit corporate entity, authorized by thirty U.S. states and the District of Columbia,\u00a0that includes positive impact on society, workers, the community, and the environment\u2014in addition to profit\u2014as its legally defined goals. <em>Benefit corporations differ from traditional C corporations in purpose, accountability, and transparency, but not in taxation.<\/em><\/p>\n<p>In April 2010, Maryland became the first U.S. state to pass benefit corporation legislation.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-8218\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/11\/01225746\/9403769706_c6db2857a6_k.jpg\" alt=\"decorative image\" width=\"350\" height=\"233\" \/>The purpose of a benefit corporation is to create <strong>general public benefit<\/strong>, which is defined as a material positive impact on society and the environment. A benefit corporation\u2019s directors and officers operate the business with the same authority as in a traditional corporation, but they are required to consider the impact of their decisions not only on shareholders but on society and the environment, too. In a traditional corporation, shareholders judge the company&#8217;s financial performance; with a benefit corporation, shareholders judge performance based on the company&#8217;s social, environmental, and financial performance. Transparency provisions require benefit corporations to publish annual benefit reports of their social and environmental performance using a comprehensive, credible, independent, and transparent third-party standard.<\/p>\n<p>Some well-known examples of benefit corporations are Kickstarter, Patagonia, and King Arthur Flour.<\/p>\n<h2>Forming a Benefit Corporation<\/h2>\n<p>New companies can incorporate as a benefit corporation in any state where benefit corporation legislation has been passed. (Instead of recognizing benefit corporations, Washington created social purpose corporations in 2012 with a similar focus and intent.) The\u00a0process varies\u00a0by state, but many states require benefit corporations\u00a0to do the following:<\/p>\n<ul>\n<li>declare a commitment to creating general public benefit<\/li>\n<li>adopt a third-party standard<\/li>\n<li>prepare an annual benefit report<\/li>\n<li>distribute the annual benefit report to the owners and post it on the company&#8217;s website<\/li>\n<\/ul>\n<h2>B Corp Certification<\/h2>\n<p><span style=\"color: #333333;\">Businesses that want to take their social and environmental commitment even further can become a Certified B Corporation. This involves a rigorous assessment process by B Lab, which uses a survey to\u00a0rate a company&#8217;s environmental practices, employee treatment, activism within its community, and other factors. Businesses that surpass a certain score are certified by\u00a0B Lab, which then audits them from time to time to ensure that they are living up to the movement&#8217;s standards.<\/span><\/p>\n<blockquote><p><span style=\"color: #333333;\">[B Lab certification] is like a Good Housekeeping seal of approval,&#8221; said David Murphy, former CEO of\u00a0<a style=\"color: #333333;\" href=\"http:\/\/www.betterworldbooks.com\/\" target=\"_blank\" rel=\"noopener\">Better World Books<\/a>, in a 2011 Business News Daily interview.\u00a0&#8220;If your company is a Certified B Corporation, that really says something. You&#8217;re there to serve all those stakeholders, and you&#8217;re willing to prove it.<a class=\"footnote\" title=\"Fallon, Nicole. &quot;Becoming a Benefit Corporation: Is it Right for Your Business?&quot; Business News Daily. January 22, 2016. http:\/\/www.businessnewsdaily.com\/8734-benefit-corporation.html\" id=\"return-footnote-11650-1\" href=\"#footnote-11650-1\" aria-label=\"Footnote 1\"><sup class=\"footnote\">[1]<\/sup><\/a>\u00a0<\/span><\/p><\/blockquote>\n<h2>Benefit Corporation Taxes<\/h2>\n<p>Benefit corporations are treated like all other corporations for tax purposes. B corps elect to be taxed either as a C or S corp.<\/p>\n<h2>Disadvantages of a Benefit Corporation<\/h2>\n<ul>\n<li><strong>Transparency and Reporting Requirements<\/strong>. Benefit corporations must provide\u00a0an annual benefit report according to a third-party standard (such as B Lab) and make the report available on their company websites. The purpose of this is\u00a0to assess the company\u2019s performance with regard to its public purpose(s).<\/li>\n<li><strong>Annual Fees to Retain Certified B Corp Status.<\/strong>\u00a0If a B corp elects to receive certification from a third party, such as B Lab, fees for &#8220;certified&#8221; B corp status are\u00a0based on annual sales, with a minimum of $500. To keep certification, the company must pay a renewal fee each year and recertify every two years.<\/li>\n<li><strong>Compliance and Governance Obligations<\/strong>. Most states require publicly traded companies with a\u00a0B corp designation to have a \u201cbenefit director\u201d who is responsible for ensuring that the corporation meets its stated public purpose.<\/li>\n<\/ul>\n<div class=\"textbox tryit\">\n<h3>Practice Question<\/h3>\n<p>\t<iframe id=\"assessment_practice_859d5ed7-e008-41ce-9293-aa2e356c0e89\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/859d5ed7-e008-41ce-9293-aa2e356c0e89?iframe_resize_id=assessment_practice_id_859d5ed7-e008-41ce-9293-aa2e356c0e89\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe><\/p>\n<\/div>\n<h2>Advantages of a Benefit Corporation<\/h2>\n<ul>\n<li><strong>Protection of Mission<\/strong>. Becoming a benefit corporation gives companies more options and protections if they decide to sell the\u00a0business to someone else or take it public, because other factors besides price (e.g., the public benefit mission) must also be taken into account.<\/li>\n<li><strong>Reputation<\/strong>. Incorporating\u00a0as a benefit corporation allows companies to stand out\u00a0as businesses that have a\u00a0social conscience and aspire to a standard they consider higher than maximizing profit\u00a0for shareholders. For investors and consumers who are committed to social and environmental responsibility, benefit corporations provide additional\u00a0choices.<\/li>\n<li><strong>Creation of Value<\/strong>. Because it&#8217;s committed to considering other stakeholders&#8217; interests, a benefit corporation may create value via\u00a0employee engagement and customer loyalty, thereby improving results\u00a0for all stakeholders\u2014including the owners\/shareholders. As well, certain profit-making opportunities may not be available without an assured commitment to other stakeholders.<a class=\"footnote\" title=\"&quot;Benefit Corporations: Frequently Asked Questions.&quot; BLab. http:\/\/benefitcorp.net\/sites\/default\/files\/FAQs%20Directors%20and%20Officers_6_17.pdf\" id=\"return-footnote-11650-2\" href=\"#footnote-11650-2\" aria-label=\"Footnote 2\"><sup class=\"footnote\">[2]<\/sup><\/a><\/li>\n<\/ul>\n<div class=\"textbox tryit\">\n<h3>Practice Question<\/h3>\n<p>\t<iframe id=\"assessment_practice_5f5e9733-4a1e-4d54-98fa-4a6329b0d1eb\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/5f5e9733-4a1e-4d54-98fa-4a6329b0d1eb?iframe_resize_id=assessment_practice_id_5f5e9733-4a1e-4d54-98fa-4a6329b0d1eb\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-11650\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Revision and adaptation. <strong>Authored by<\/strong>: Linda Williams and Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-sa\/4.0\/\">CC BY-SA: Attribution-ShareAlike<\/a><\/em><\/li><li>Practice Question. <strong>Authored by<\/strong>: Robert Danielson. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Benefit Corporation. <strong>Provided by<\/strong>: Wikimedia. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/en.wikipedia.org\/wiki\/Benefit_corporation\">https:\/\/en.wikipedia.org\/wiki\/Benefit_corporation<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-sa\/4.0\/\">CC BY-SA: Attribution-ShareAlike<\/a><\/em><\/li><li>Kickstarter HQ Lock. <strong>Authored by<\/strong>: Scott Beale. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/www.flickr.com\/photos\/laughingsquid\/9403769706\/\">https:\/\/www.flickr.com\/photos\/laughingsquid\/9403769706\/<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-nd\/4.0\/\">CC BY-NC-ND: Attribution-NonCommercial-NoDerivatives <\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section><hr class=\"before-footnotes clear\" \/><div class=\"footnotes\"><ol><li id=\"footnote-11650-1\">Fallon, Nicole. \"Becoming a Benefit Corporation: Is it Right for Your Business?\" Business News Daily. January 22, 2016. <a href=\"http:\/\/www.businessnewsdaily.com\/8734-benefit-corporation.html\" target=\"_blank\" rel=\"noopener\">http:\/\/www.businessnewsdaily.com\/8734-benefit-corporation.html<\/a> <a href=\"#return-footnote-11650-1\" class=\"return-footnote\" aria-label=\"Return to footnote 1\">&crarr;<\/a><\/li><li id=\"footnote-11650-2\">\"Benefit Corporations: Frequently Asked Questions.\" BLab. <a href=\"http:\/\/benefitcorp.net\/sites\/default\/files\/FAQs%20Directors%20and%20Officers_6_17.pdf\" target=\"_blank\" rel=\"noopener\">http:\/\/benefitcorp.net\/sites\/default\/files\/FAQs%20Directors%20and%20Officers_6_17.pdf<\/a> <a href=\"#return-footnote-11650-2\" class=\"return-footnote\" aria-label=\"Return to footnote 2\">&crarr;<\/a><\/li><\/ol><\/div>","protected":false},"author":17,"menu_order":10,"template":"","meta":{"_candela_citation":"[{\"type\":\"cc\",\"description\":\"Benefit Corporation\",\"author\":\"\",\"organization\":\"Wikimedia\",\"url\":\"https:\/\/en.wikipedia.org\/wiki\/Benefit_corporation\",\"project\":\"\",\"license\":\"cc-by-sa\",\"license_terms\":\"\"},{\"type\":\"original\",\"description\":\"Revision and adaptation\",\"author\":\"Linda Williams and Lumen Learning\",\"organization\":\"\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by-sa\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"Kickstarter HQ Lock\",\"author\":\"Scott Beale\",\"organization\":\"\",\"url\":\"https:\/\/www.flickr.com\/photos\/laughingsquid\/9403769706\/\",\"project\":\"\",\"license\":\"cc-by-nc-nd\",\"license_terms\":\"\"},{\"type\":\"original\",\"description\":\"Practice Question\",\"author\":\"Robert Danielson\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"feff5d40-d554-4065-8e0e-81b169e426ac, 3f67137a-8966-4fb3-9168-14c64fe6831d, 32998055-28d8-4326-b91e-e9516ed98eb6","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-11650","chapter","type-chapter","status-publish","hentry"],"part":86,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/11650","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/wp\/v2\/users\/17"}],"version-history":[{"count":13,"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/11650\/revisions"}],"predecessor-version":[{"id":15516,"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/11650\/revisions\/15516"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/pressbooks\/v2\/parts\/86"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/11650\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/wp\/v2\/media?parent=11650"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/pressbooks\/v2\/chapter-type?post=11650"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/wp\/v2\/contributor?post=11650"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/wp\/v2\/license?post=11650"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}