group of employees at table in a meeting
From potential cost savings to encouraged social responsibility, starting a B corp comes with some advantages, if your state offers the certification process. — Getty Images/fizkes

From your taxes to your money-raising ability and operations, your business structure impacts everything. Before you register your business with the state, you’ll need to choose which business structure is best-suited for your company and your goals.

If you’re considering choosing a benefit corporation, or B corp, here are some factors to consider.

[Read: Getting Ready to Launch? How to Choose the Right Business Structure]

What is a B corp?

According to the U.S. Small Business Administration, a B corp is a for-profit corporation recognized by the majority of U.S. states that are driven by both mission and profit. Shareholders hold the company accountable to produce a financial profit as well as some sort of public benefit.

Companies that are registered as a B corp must achieve a minimum score on the B Impact Assessment, an evaluation of the company’s impact on its workers, customers, community and environment. They also must make their B Impact Report — the breakdown of the assessment — transparent through the Certified B Corporation website. All of this is overseen by a governing body called the B Lab.

Becoming a B corp allows companies to hold on to their social mission, while allowing them to scale the business. Since they are for-profit, the company can grow and raise money though still be held to a socially responsible standard.

Advantages of a B corp

A few of the top advantages to starting a B corp are:

  • Encourages social responsibility. When your company is a B corp, it holds you and your practices accountable for social and environmental responsibility. Consumers are increasingly interested in sustainable companies and want to be convinced of their social efforts. By adhering to B corp standards that are made transparent, customers can see how the companies they support are making a difference.
  • Attracts like-minded employees. Knowing your business is actively trying to make a positive social change will attract top talent looking to find meaning in their careers. B corp certification validates company’s employee-centric culture which means you’ll be able to retain top talent as well.
  • Cost savings. Registering as a B corp can save your company money in the long run. You’ll have access to B corp community data, which provides you access to learn the most cost-effective means to be sustainable. Plus, the certification process helps companies identify needless and wasteful spending.

Before you take the first steps to become a B corp, first check to make sure certification is available in your state.

Requirements of a B corp

If you’re starting a new business or are an existing company seeking to transition to a B corp, there are four steps you need to complete to become certified:

  • Take and pass the B Impact Ratings System. This test gives you a score on your company’s existing employee and environmental practices.
  • A telephone interview with a B Lab staff member that reviews the findings of the B Impact Ratings System. If you score above an 80, your company is eligible for a B corp certification.
  • Start adopting the B Corporation Legal Framework within your company.
  • Complete and sign a Term Sheet that makes your certification official.

Passing the test is no easy feat, as there are over 200 points on the assessment. Once you’ve passed, the ethical standards you’re held to are rigorous. After two years, you must recertify as standards change. Companies are subject to third-party audits during that time.

[Read: What Is an S Corporation?]

Is a B corp right for your business?

Being classified as a benefit corporation isn’t the right move for every business. If you think you might get a tax break for being environmental conscience, you’d be mistaken. B corps have to pay the same amount of taxes as other for-profit businesses.

Before you take the first steps to become a B corp, first check to make sure certification is available in your state. Currently, 35 states have passed benefit corporation legislation, while five are working on it.

If you started or are going to start a company with the intention of public good, registering as a benefit corporation is the best way to ensure you’ll be held to ethical standards. You can continue your mission, attract top talent and still be able to grow the company.

Your Opinion Matters

Tell us what you think about CO— and be entered to win a $100 Amazon gift card.



Published May 05, 2020