What are Benefit Corporations? Benefit Corporations are for-profit companies specifically designed for philanthropy. Becoming a “Benefit Corporation” means being certified by the nonprofit organization “B Lab” to meet rigorous standards in specific areas such as civil, social, and ecological.
Benefit Corporations and North Carolina
Currently, Benefit Corporations cannot be formed in North Carolina since legislation has not been passed permitting this type of business entity. Therefore, incorporating under this legal structure is not a possibility for interested companies. However, options still exist!
B Corporation. A company can acquire a B Corporation certification in North Carolina. This is a process that not only allows companies in states without Benefit Corporation legislation to mirror their desires for fiduciary and environmental responsibility but also maintains a for-profit structure. A B corporation allows owners to measure and evaluate social and environmental impact against a comprehensive third party standard maintained and instituted by B Lab. B Lab is a non-profit organization that serves a global movement of people using business for good works. B Lab keeps businesses turned B corps accountable and helps maintain each certified B corps' social or environmental mission.
Benefit Corporation v. B Corporation. Although benefit corporations and B corporations sound similar, they are distinctly different. B corporations offer a great alternative to benefit corporations.
A Benefit Corporation is a legal entity classification for a for-profit business. Social entrepreneurs can choose this classification to mirror their desires for fiduciary and environmental responsibility. Benefit Corporations commit to making a positive impact on society and the environment all while making a profit. Legal documents are required to consider the consequences of all key actions as they affect stakeholders, not just shareholders under a benefit corporation structure.
Similarly, a B Corporation is a third-party certification that includes considerations for certain parameters such as social, accountability, transparency, and environmental. There are fees and future audits to ensure compliance with all of the standards. A company that is interested in a social/environmental mission but would still like to stay for-profit should consider B corporation certification.
How to Form a B Corporation. In North Carolina, attaining B Corporation certification begins by first incorporating via available corporate structure, such as an LLC or C Corporation, and then proceeding to fulfill the performance assessment of the certification. The Operating Agreement or Corporate Bylaws must be drafted to ensure the company's socially conscious. First, a company must complete the B Impact Assessment and earn a reviewed minimum score of 80 out of 200 points. A company must then schedule an assessment review. After the assessment is completed a background check will be instituted, as will a disclosure questionnaire.
Legal Requirements. For existing companies in North Carolina, the first step is to determine whether the company will need to convert the type of entity or amend the governing documents (e.g. Operating Agreement or Bylaws) or to meet the legal requirements for certification. The second step is to engage key board members, legal counsel, and investors (if any) about the usefulness and implications. For new companies, the first step is to determine the appropriate choice of entity and then to draft the governing documents to reflect the needs of the B Corporation.
After certification as a B Corporation, C Corporations must obtain board approval of the planned amendment and obtain shareholder approval of the board approved amendment. The legal requirement gives legal protection to directors and officers to consider the interests of all stakeholders, not just shareholders, when making decisions as well as holding directors and officers accountable to the newly created social and environmental interests.
In short. A certified B Corporation is a great alternative for the benefit corporation status in states – such as North Carolina- that have not yet passed legislation permitting benefit corporation structure. B Corporations can be utilized for new or existing businesses and social entrepreneurs that want to make a positive impact on their community while making a profit.