Want to affect social and environmental change, and make a profit? Meet S and C Corps' kind younger brother!
In an era of increased awareness surrounding social and environmental issues that affect our society, the days of companies, and large corporations in particular to stay silent. In the wake of these changes, companies are beginning to adopt a concept known as the "triple bottom line". Instead of only worrying about the bottom line (ie. profits), companies now approach the management and growth of their businesses by also considering what's good socially and environmentally, as well as what makes sense for the corporation. B Corps take this idea and bake it into the foundation of the company.
What is a B Corp?
B Corp is short for Benefit Corporation. This is a relatively new type of corporate structure that companies can adopt which allows corporations to gain benefits for providing a public good along-side creating a profit. In order to gain the status of a B Corp, the company must go through additional steps beyond the regular incorporation process. These companies can also choose to become a "Certified B Corp" by going through intensive testing from B Labs, a non-profit organization that supports B Corps with the goal of "transforming the global economy to benefit all people, communities, and the planet".
Did You Know: B Corporations are an incredibly new concept and have only been in existence since approximately 2006. They are so new that not all states have adopted them as a legitimate business structure.
Pros
Given the effort required to become a B Corp there are a number of benefits that offset the additional time and resources spent:
Improved Employee Satisfaction: Since B Corps focus on incorporating socially and environmentally beneficial ideals in their client facing operations, it should not come as a surprise that they also tend to take the welfare of their employees into account as well. As a result, B Corps tend to have happier employees and an easier time attracting top talent which helps increase productivity and profits.
Law of Attraction: All things being equal, why wouldn't investors and clients choose a company who can fulfill their needs and do good while they are at it? This is particularly beneficial if a company is in an industry with low margins or high levels of competition. These corporations have a strategic advantage that sets them apart from other corporations.
Legal Protection: Many corporations have a hard time enacting real social or environmental change due to the backlash from investors and other stakeholders. A B Corp protects a company from being attacked legally for choosing to do the right thing not just for their backers, but for the world at large.
Which of the triple bottom line benefits are the most important to you?
0%Social Benefits
0%Environmental Benefits
0%Corporate Benefits
Cons
Of course, everything cannot be sunshine and roses! There are a few draw backs to choosing to be structured as a B Corp:
Time and Energy Expenditure: Due to the additional social and environmental considerations surrounding a B Corp, it should not come as a surprise that its creation is more labor intensive that its S or C Corp counterparts. This is particularly true if the company decides to go through the rigorous process needed to become B Lab certified.
New Structure, New Problems: Since this structure is relatively new, the regulations surround their existence are still evolving which means changes may need to be made in the business later on to remain compliant.
Just a Pat on the Back at Tax Time: While we have covered the possible increases to profitability, there are not yet any additional tax benefits to incorporating as a B Corp beyond those afforded to other corporations. These companies have to be satisfied with the warm fuzzies they get from doing good.
How To Get Started
Since we work with clients in all 50 states, we can help establish your B Corp if it makes sense for your business and it is available in your state. Schedule a business growth consultation with us so we can help you choose the perfect structure for your business. Click the button below to get started.
Comments