Benefit Corp "B" Corp pros / cons?

Douglas Tarr Entrepreneur and Software Architect

May 1st, 2014

Last year, I posted a discussion about for-profit vs non-profit status and got some great responses and met some great people here. One of the ideas in that thread was to form as a "B" corp, which I'm now starting to consider more seriously, because I think as a community based organization, it would help my credibility with my target audience, but not be as restrictive as a 501c3 non profit.

I would like to know if anyone has gone through the process of getting accredited specifically as a California "B" corporation and what were the pros and cons of that choice, and also if you can point to online resources that might be able to help me learn more.

For example. I know that you can often get free or discounted software and services as a 501c3 non-profit. Has anyone also received benefits like this from being a "B" corp?

Thanks,
Doug

Rob G

May 1st, 2014

Doug, you could also consider forming a "Social Purpose Corp" in WA - very similar to a B corp, but without the hoops and 'certification' and associated fees of a B corp. WA state was the first, but other states may have followed by now. The basics are that it functions essentially identically to a 'C' corp, but you bake into the articles of incorporation the company's social purposes and that cannot be changed without 2/3rd shareholder approval. This gives officers and directors some legal protections to allow the corporation to do social good without getting sued for not doing what all for profit companies are supposed to do: maximize profits for shareholders. There is a small law firm in seattle that has experience with social purpose coprs and B corps (we use them) and i'm sure Peter could give you some pro bono time (easy for me to say) to help you navigate the pro's and con's from a legal perspective.

Shobhit Verma

May 1st, 2014

Hi Doug,

I love the idea of B Corp. At first glance it just seemed that someone wanted my money to give me a stamp of "I am a good company" ... but after some research I started appreciating the true beauty of it.

My observations

1) It gives you a network of other "good" companies. If there are synergies, lasting relationships can be formed more easily.

2) Though donations to BCorps are not tax deductible, I think some getting some Corporate grants are still possible

3) The only reason I haven't incorporated my Ed Tech startup as a B corp is because at some point I would be looking to raise a lot of money and I am skeptical whether a typical VC would want to invest in a B Corp.

Good luck!

Kristin Fitch Co-Founder ZiggityZoom Media-Online & Mobile Ed Tech- Content & Games- Business Educator & Mentor, Author, Speaker

May 1st, 2014

Doug- A good friend of mine with years of experience running companies and starting businesses is at the forefront of benefit corporations. she has written a book about them and consults benefit companies. She is in Norfolk, Va and works with people across the country. Her name is Lisa Fournier and her entrepreneurial learning lab company is www.norfolkfairtrade.com. Her book is available on amazon. I have seen first hand many B corps started in Norfolk. Check out her site and background- it would be worth a email to her. She is also now doing research and studies related to B Corps and entrepreneurs around the world. Kristin

Shobhit Verma

May 1st, 2014

Here is a secret for everyone. Ikea is a non-profit :)

Don't believe me? See below

http://www.onlinemba.com/blog/video-why-is-ikea-a-non-profit/

Anonymous

May 1st, 2014

Filing as a B corp is very easy and has no cost. All it takes is putting a few words in your articles of incorporation. Later, when your company is successful, you can go for the certification. See http://peoplecount.org/b-corp.htm

Candice Hughes, PhD, MBA

May 2nd, 2014

Yes, I am also curious about attracting investors with a B corp. I am also interested in this for my behavioral health game startup but I also need investors as my startup grows. If anyone knows about attracting investors if you are a B corp, I am interested to hear their comments.

Jim Bowes Promoting and producing sustainable natural-media techniques

January 26th, 2016

One of the great things about B Corp is that it attracts impact investors. Huge amounts of investment funds are now set aside for impact investing. The problem is that there seems to be too few companies who meet the criteria or it is hard for investors to know if the company really is what it says it is. So though your start-up or company may not be as attractive to VC (and are these really the types of people and institutions you want as they are focused on maximising profits first) but there is a lot of investors who are looking to use their money to make the world a better place. In this case in my opinion, being B Corp will actually make it easier for you to find investment.

However, it is also a mind set. B Corp companies are for profit companies just not profitability that is out of proportion. If you are looking at getting stinking rich, having a private jet and really could not care much about the fact that you pay those who work for you minimum wage, becoming a B Corp will not be for you.