In October 2018, Delaware passed the Certification of Adoption of Transparency and Sustainability Standards Act. This law established a voluntary disclosure system to promote dialogue on sustainability and responsibility among participating Delaware companies and their various stakeholders. A company that opts for the disclosure regime does not change its corporate form. A Delaware company can be certified if (1) its governing body applies policies, policies, and standards that govern the company`s operations in a sustainable and responsible manner, (2) the company applies measures to assess whether it has achieved its sustainability goals, and (3) the company accepts ongoing public reporting requirements. The company`s governing body selects the company`s standards and can adapt them to the specific needs of the industry or the company`s activity. In developing these standards, the governing body may draw on a variety of sources, including external experts and advisors, as well as input from investors, clients and clients. Public benefit corporations (PBCs) are corporations that are legally structured to consider the interests of social welfare and maximize shareholder value. In short, a PBC structure allows companies to focus on both profits and benefits to society. Unlike traditional for-profit businesses, which must legally seek profit above all else, B Corps must consider the impact of their decisions on their employees, suppliers, communities and the environment. Although PBCs are a specific type of legal entity, any for-profit entity can be a B Corp as long as it is certified by B Lab (a non-profit organization founded in 2006) and pays the appropriate membership fee.
In recent years, a relatively new legal entity has begun to attract attention, in right-wing nerd circles and elsewhere. Some well-known companies have made the switch, including Kickstarter PBC and Plum, PBC (aka /k/a Plum Organics). This organization is the not-for-profit corporation or „PBC”. Read on to find out what distinguishes a real PBC from a regular business and where the „B-Corp” designation fits into the big picture. A quick clarification of the terms, as some people are still prone to the mistake of using the terms „not-for-profit corporation” or „PBC” interchangeably with „B-Corp”, although these two designations are not at all the same. A PBC is a type of business entity, such as a „corporation” or „LLC”. A „B Corp” is a business (it may or may not be a PBC) that has received a certification, similar to the „fair trade” certification you might look for when buying coffee. The designation is (ironically) awarded by the nonprofit B Labs, which puts potential B Corp applicants to the test with its „impact assessment” and examines companies` performance in five different „impact areas”: governance, workers, community, environment, and customers. Patagonia, for example, has been certified „B” since 2011. Today, there is a growing community of over 1,700 certified B Corps. B-Corp certification is an independent, third-party certification that meets rigorous standards of social and environmental performance, accountability, and transparency. B Lab, the nonprofit behind the certification, defines a B Corporation certified company as a hybrid entity focused on both generating profits and solving significant social and environmental challenges.
B Lab`s certification process includes a comprehensive review of a company`s performance in these three areas. Companies typically seek B Corp certification to increase credibility. In general, the main differences between the main types of business units relate to how they are managed on a day-to-day basis and how they are taxed. For example, a group of management consultants who plan to stay in business for a long time might decide to form an LLC, which would allow them to take advantage of relatively few legal requirements for meetings and formal documentation of decisions, and they may prefer the standard imposition of the LLC entity type. On the other hand, a fast-growing software team might choose a company because it won`t make a profit for a while and plans to acquire investors in the near future. Both entities, if organized under state laws (whether Delaware or Alaska), must explicitly establish a business objective. In order to give these companies the greatest possible leeway, the founding documents of many companies merely state that the purpose is to „participate in any lawful act or activity for which a company may be organized in accordance with the law”. Quite general and exceptionally wide. Foundry Legal is a transactional and regulatory firm located in Denver, Colorado. We represent social and nonprofit enterprises in New York, Washington DC and Colorado. For more information, contact us at firstname.lastname@example.org.
B Corp status has been compared to Rainforest Alliance, LEED or Fair Trade certifications. However, unlike fair trade certification or LEED, B Corp certification goes beyond the attributes of a company`s products and looks at a company`s entire business model and operations. As described on B Lab`s website, B Corps are companies „that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.” Public benefit corporations, or „PBCs,” are a type of for-profit corporation currently licensed by 35 states and the District of Columbia, similar to a C-Corp, S-Corp or LLC. What makes them unique is that they must include at least one specific public benefit as a statement of intent in their charter. In addition to benefiting shareholders, these companies are committed to this mission as they continue to operate. Many C&S corporations already dedicate a portion of their profits to charitable events and activities without the legal distinction of being a charity. Once a company meets B Lab`s social and environmental standards, it is eligible for certain benefits due to its B Corp certification. This includes access to attractive discounts for B Lab partner organizations, including Salesforce, Intuit, and Inspire Commerce. B Corps are also eligible for pro bono legal services. In recent years, a relatively new legal entity has begun to attract attention, in right-wing nerd circles, and the charter of a Delaware public benefit corporation must clearly state that the entity is a non-profit corporation, and it must also list the benevolent purposes of the company. The second step in forming a nonprofit corporation is to submit the appropriate application to the IRS within 15 months of incorporating the business to apply for charitable status.
This is achieved by filing IRS Form 1023. As mentioned earlier, PBC is a company that is required by law to consider social welfare when making decisions. A hybrid entity first introduced in California, a nonprofit is a relatively new concept that took off in a relatively short period of time. More than 30 states now enact laws that allow for the formation of non-profit corporations, although each state has its own rules for its structure, mode of operation, and other specificities. The decision to apply for PBC status has important implications for the company`s operations. For most companies, the primary goal of the board is to maximize shareholder value, and they are required by law to make decisions with that goal in mind. The members of the board of directors of a PBC must also consider the interests of those affected by the conduct of the corporation and the specific public benefit set out in the corporation`s articles. These additional goals change some business processes and paperwork, and it`s for these differences that we`ve updated our platform. Growing companies. Finally, we are also seeing increased interest in PBC conversions from companies seeking growth capital.
Historically, many growth capital investors have pushed existing PBCs to convert to conventional companies before investing. The amendments to PBC`s by-laws will address some of the concerns of institutional private capital with respect to this form of corporation. PBC is a type of legal entity, such as a corporation or LLC.