What to Know About Incorporating as a B Corporation

B corporations are particularly a unique entity. It means that your business has decided to purse a higher standard of purpose. B Corps are committed to upholding a specific social or environmental mission or otherwise using business as a force for good.

The process for creating a certified B Corporation does differ a bit from forming other entities like limited liability companies. B Corporations conform to higher standards than companies that are not B Corp certified. Before you decide to incorporate as a certified B Corp, there are some questions you need to answer to make sure this entity is the best fit for your business.

Can my business meet high standards?

Almost any kind of product or service a business offers is eligible for certified B Corp status. The one catch is that the company must be able to adopt specific standards of purpose, accountability, and transparency.

Take some time to reexamine why you started your business. Becoming a certified B Corp makes it possible to be a for-profit company that commits to a general public benefit. Businesses that commit to a general public benefit aim to have a positive impact on society. B Corporations are a hybrid between standard corporations and nonprofits.

Are you ready for the test?

To become a certified B corporation, businesses need to first take and pass the free B Impact Assessment. The B Impact Assessment (BIA) helps measure and manage your social and environmental impact. The test includes a series of questions that focus on what it takes for your company to build a business that is better for its workers, community, and the environment.

Those who want to be fully certified need the full impact report. This takes about two or three hours to complete, and you will be able to view your results holistically. If you pass your test, you are on your way to being certified.

Will you meet legal requirements?

A business that aims to become a certified B Corporation should integrate some element of sustainability into its company mission.

Depending on your state of incorporation and existing corporate structure, you may need to make the following legal changes:

• Amend governing documents or adopt a benefit corporation status.
• Update articles of incorporation.
• Communicate with any board members or legal counsel about the shift and whether or not implications will follow when making these changes.

Advantages and Disadvantages of B Corporations

Benefit corporation advantages include:

• Added officer and director liability protection. The addition of a stated beneficial purpose allows manager to further that purpose without being subject to shareholder lawsuits.
• Attracting certain investors. A benefit corporation may attract the type of investor looking for what they consider to be a socially or environmentally conscious company.
• Attracting employees and customers. They are attracted to a company with a beneficial purpose.
• Easier to sell the business. With the sale of a traditional for-profit corporation, it is generally considered the duty of directors to obtain the highest price to maximize shareholders' financial interests.

Benefit corporation disadvantages include:

• Added officer and director liability.
• Additional reporting.
• Difficulty obtaining investors.

The Bottom Line

Once that is done, your final documents will be reviewed. You will then have to sign the B Corp Declaration of Interdependence and sign your agreement. After that you will pay your annual certification fees. The fees are listed on the B Corporation website.