Corporate Foundations vs. B-Corps?

Marley Crossland Founder and CEO at Match.edu

April 3rd, 2015

I see a lot of larger companies starting company-sponsored foundations - Salesforce, HP, Google.org, even Twilio now has Twilio.org. Then you have the advent of B-Corps. Curious what the pros and cons of each are but also why a growing organization like Twilio wouldn’t just become a b-corp if they want to that type of focus - does that signal it’s more PR driven?

Mazher Ali Associate Creative Director at Upworthy

April 4th, 2015

@David Schnider gave a good rundown of the B-corp model. It's worth pointing out that establishing as a B-corp shouldn't, as a rule, be a PR undertaking. The discerning, socially conscious consumer will see right through it.

If you want your primary focus to be on generating revenue, the externalized costs be damned, then you're probably better off using a traditional LLC or some other convention. But if you want your company to prioritize fair labor practices, ecological sustainability, and community engagement, perhaps B-corp is your model.

If you're considering alternative models that may serve broader a social mission - in addition to securing your company's financial position - it may also be worth considering setting up as a cooperative, which may take the ideas behind the B-corp to higher level, including the integration of democratic processes that involve your stakeholders (vs. shareholders). Primary stakeholders will be defined by the type of cooperative (e.g. employee/worker-owned, consumer, producer, purchasing, multi-stakeholder, etc.).

Harry Clark Managing Partner at Stanwich Group LLC and Senior Counselor at Brunswick Group LLC

April 3rd, 2015

Company-sponsored foundations reflect and support the business, policy and social interests of the companies they are associated with. Relying on being a b-corp carries the real risk that company conduct may, at some point, diverge from b-corp concept of virtue. b-corp ethical guidelines are generic and can not realistically apply to all companies, in all industries, at all times.

David Schnider Legal and Business Advisor

April 4th, 2015

The primary difference is that a foundation is typically a non-profit organization, whereas a B-Corp operates for profit. Unlike a regular corporation though, B-Corps are not solely profit driven and can choose to act in the public benefit, even if it reduces their profits, without violating their obligations to their shareholders.

If you want to be able to accept tax deductible donations, like most foundations do, then you likely want to organize as a non-profit. If you are not soliciting donations and want to operate a for profit business that is socially conscious, then a B-Corp may be a good option.

Jono Spiro Technical Lead at Carlypso

April 3rd, 2015

I'm getting ready to incorporate and because I'm working in the pet industry and am at the helm of my destiny, I'd really like to form as a B Corp based on topical understanding. But I'm inexperienced in the real meaning of it and practical implications.

Frankly, if it forced me and my cofounder to go and volunteer at a local shelter because it was in our charter to do good, that would be a good thing.

Could it make us more attractive to other companies to work with, or to be acquired by, to consumers? Or is it just something we keep under our hat most of the time. Only once have I seen "Certified B Corporation" on a product, on a shampoo, and I'm not sure if people even know what that means.

I saw that another pet store has a foundation and they donate 2% of sales (profits? gross? couldn't tell) to their foundation -- that sounds great and looks nice on their website. Maybe that's the way to go, but then you do have another organization to run.

John Braze Technology Strategist | Business Development | Portfolio Planning | Growth & Investment

April 4th, 2015

In regards to products labeled "Certified B Corporation", this causes confusion because it is different than incorporating as a B-corp. The certification is issued by a third party (B-Lab) based on meeting certain requirements.

A company could be a "Certified B Corporation" without being incorporated as a B-corp.
A company can incorporate as a B-corp without being certified by B-Lab.

Taxation of a B-corp is typically similar to a C-corp.
If the goal is a tax exempt status, then a 501(c)3 or private foundation is more appropriate. These are more restrictive in terms of where the money comes from and how the organization uses it; especially for 501(c)3's.

Daniel D'Alonzo

April 5th, 2015

john is correct -B Lab is not how you become a true Benefit Corporation. The little "B-Corp" label you see on websites is not a determining factor of what company is or is not a Benefit Corporation by law. There are about 26 states in the USA who have Benefit Corporation legislation. I recommend speaking with Laura Jordan, the founder of the first Benefit Corporation if you are interested in learning more about this entire process.