There are currently about 2,700 benefit corporations, or B corps, worldwide. That might not sound like a lot until you consider that the designation didn’t even exist until 2007. There’s been a major uptick in the past few years. Some big names among them include Kickstarter, Seventh Generation, and Patagonia.
A benefit corporation holds a specific designation whereby it pledges to do good in the world. Still a for-profit company, a B corp balances profit with social and environmental impact. The certifying body says, on its website:
“The B Corp community works toward reduced inequality, lower levels of poverty, a healthier environment, stronger communities, and the creation of more high quality jobs with dignity and purpose. By harnessing the power of business, B Corps use profits and growth as a means to a greater end: positive impact for their employees, communities, and the environment.”
There are still only a handful of B corps in each of Ohio’s biggest cities, which means the time is ripe to stand out. (As of mid-2018, CincyInno reported that there were 21 in the entire state.) Is it the right choice for your company?
Why Might You Want to Become a B Corp?
B corps are attractive to employees, especially younger ones who will comprise the workforce for decades to come. Michele Giddens, contributor for Forbes, writes, “Today’s workforce is rejecting the old Milton Friedman notion that the only social responsibility of business is to maximise profits; they think business should also be trying to make a positive difference in the world.”
Consumers, too, are more savvy than ever about the sources of the products they use. They are looking for ways to reduce their carbon footprint and to make socially responsible purchasing decisions.
There is no minimum size. Anyone from a sole proprietorship or startup to a large, multinational organization can apply, as long as they meet the legal requirements.
What Are the Steps to Become a B Corp?
Thirty-seven states have laws that permit companies to pursue social missions without fear of shareholder litigation. The Ohio Senate unanimously passed B Corp legislation, and it has been introduced in the House. Although benefit corporations already exist in Ohio (as in all other states), a law like this would formally recognize them. Their tax status would remain the same.
The nonprofit B Lab reviews and certifies companies seeking the designation. Unlike with nonprofits, B corps aim to make a profit, but that success is weighed against other factors.
B Lab looks social and environmental actions, transparency, and legal accountability, and how they balance all of this against earning a profit. They conduct a six-step performance analysis, which they outline here. The company gets a score for social and environmental performance, accountability and transparency.
Next, the company signs the B Corp Declaration of Interdependence and Term Sheet. In addition, they must incorporate their social or environmental mission into their governance articles. Finally, they company receives certification.
B Corporations and Taxes
B corp certification has no bearing on taxes. Your company will continue to pay taxes as a sole proprietorship, C corp, or S corp, depending on your current structure. There is no additional auditing process for B corps.
As always, if you need help planning for or filing your business taxes, reach out to our qualified accountants and let’s discuss your needs.
Image by Gerd Altmann from Pixabay
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