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10 April 2018

What Are Public Benefit Corporations and B Corps?

What Are Public Benefit Corporations and B Corps?

Can you make a profit and save the world at the same time? Many startups and businesses aim to do just that and, now, there are business designations and corporate structures to fit their missions. Public Benefit Corporation (PBC) status and B Corp designations are both tailor-made for do-good for-profits, but that’s where the similarities end.

Traditionally, businesses with a public-benefit mission chose nonprofit incorporation, but not without strings attached. While nonprofits—particularly those designated with the IRS as 501(c)3—win when it comes to avoiding taxes and certain liabilities, there are serious restrictions when it comes to ownership, profitability, and privacy.

Public Benefit Corporation (PBC) status, on the other hand, is a relatively new legal structure that functions more like a C Corp or LLC. Many public benefit startups are choosing this designation over nonprofit status because it allows them to generate revenue and raise equity funding with fewer restrictions.  According to VentureBeat, some venture capitalist seek out PBCs as investment opportunities. Well-known PBCs include Patagonia and Kickstarter.

Now here’s the confusing part: There is also a B Corporation (B Corp) certification that differs from PBC status. According to B Lab, the entity that awards B Corp certification, this designation is not a legal or tax structure. Instead, it’s a stamp of credibility like Fair Trade, USDA Organic, or LEED certifications. In Texas, B Corps include GoodPop® All-Natural Frozen Pops and the Capital Factory co-working facility and startup accelerator.  While a B Corp certification isn’t an official business structure, business owners who have be awarded the certification do use it to their advantage.

 

POSSIBLE QUOTE FROM CAPITAL FACTORY

 

Talk to your business advisor or attorney about the advantages or disadvantages of these designations. For questions about accounting and tax implications, feel free to contact us

Image Copyright: violetkaipa / 123RF Stock Photo

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