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B Corp versus Public Benefit Corp. What’s the difference?

Jul 14, 2020 | B Corp

One of the most common questions I get from clients revolves around the differences between a B Corps and Public Benefit Corps. While the names may indicate that both certifications are, in fact, corporations, there are some significant differences.

B Corp

First and foremost, the B Corp Certification is not a legal entity recognized by the federal government like an S Corp, LLC, or sole proprietorship. Certified B Corporations are businesses that have been reviewed through a rigorous process that looks at social, environmental, accountability, and transparency.

The B Corp certification is a “big picture” evaluation that looks at worker engagement, community involvement, environmental impact, business governance, and customer relationships. The only legal requirements for B Corporations are to formally consider the impact of their stakeholders’ decisions. The legal requirements can be met through a variety of structures (traditional corporations, LLCs, and LLPs). Non-profits such as 501(c)(3)s are NOT eligible for the B Corp certification. However, companies of the following structures are eligible to certify: benefit corporations, LLCs, L3Cs, LLPs, C Corporations, S Corporations, and sole proprietorships. As always, confer with legal representation before making any structural changes to your company.

Public Benefit Corp

Public Benefit Corporations are created for different purposes. While traditional corporate structures are designed solely to maximize shareholder profits, the Public Benefit Corporation takes into account profit and mission alignment. Public Benefit Corps are NOT hybrids of Non-profits because they are still for-profit entities. Through a Benefit Corp, extra fiduciary duties are placed into a corporate charter with extensive shareholder rights. For example, shareholders may get expanded voting rights for issues like director election or company mergers. Lastly, Public Benefit Corps can go public and actively be traded on the stock market, just like any other corporate entity.

The naming conventions of the two impact options may be confusing. Still, with a little advice from expert consultants and legal counsel, you can find the right fit for your company.

Give us a call today to start the process!

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