An Introduction to B Corporations

Among businesspeople, it is common knowledge that the primary duty of a corporation’s executives and board of directors is to earn shareholders a return on their investment. This fiduciary duty has long been the accepted practice. The movement to be environmentally conscious, however, has ushered in new ways of thinking, including the development of a unique type of business structure referred to as a B corporation. This blog will provide a general overview of this business type and the steps needed to be certified as one. 

What is a B Corp?

The B corporation is not necessarily a business structure like other types of corporations. Instead, a company can become a B corporation by completing the certification process administered by B Lab, a nonprofit organization set up to govern this process. This designation is only given to companies that satisfy a set of rigorous requirements intended, per B Lab’s website, to identify “businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.”

Please note that a B corporation is not the same as a benefit corporation. While B corporations and benefit corporations are similar, the main difference is that B corporations receive a certification from B Lab, while benefit corporations merely self-report their performance. A benefit corporation is actually a type of business structure available in 32 states, while any company in any state can pursue B corporation status.  

Across 50 countries, more than 3,000 business owners have succeeded in securing B corporation status for their companies, including a few notable brands here in the United States. Some of the more well-known B corporations include Patagonia, the clothing company; Ben & Jerry’s, the famous Vermont-based ice cream company; and Warby Parker, a retailer specializing in prescription glasses and sunglasses. 

How Simple is It to Become a B Corporation?

Setting up a certified B corp is not as simple as filing a handful of documents with the Secretary of State’s office and paying a registration fee. The first step for California entrepreneurs is to amend their corporation’s articles of incorporation to reflect that they want their company to become a B corporation. This generally triggers all sorts of notices to shareholders, who must approve the amendment by a 2/3 margin. 

Next, you must satisfy all parts of the B Impact Assessment (BIA), which uses numerous tests to measure your corporation’s impact on “workers, community, environment, and customers.” This assessment has many sections and includes hundreds of questions, which may vary based on the location and size of your company. From your answers to these questions, the staff at B Lab will calculate your numerical score, which must total at least 80 across all “impact areas” to meet the threshold for certification. 

Costs Associated with B Corporations

The BIA assessment tool is free, but if your company achieves B corporation status, it will have to pay a minimum of $1,000 per year in annual fees. The annual fees cover expenses like licensing, technology platforms provided by B Lab, and other costs associated with the certification. Fees vary by region and by company revenue, and there are a number of discounts that can affect the final price you pay as well. Please consult the B Lab website for the most up-to-date pricing information.

Why Start a B Corporation?

Many people engaged in growing a business do so with a dual mission: to seek profit and serve their community at the same time. Complying with the requirements for B corporation certification is a way to ensure that their company is fulfilling both of these goals as optimally as possible. Certification is also a way that business owners can signal to investors, customers, community members, and other financial stakeholders that their business is both socially and commercially valuable and thus worthy of their attention and support. 

Conclusion

Helping entrepreneurs and business owners put their companies on the healthiest footing possible has long been a cornerstone of our practice. If you are interested in seeking B corporation certification or have any other legal concerns about your business, give Integrated General Counsel a call at 925-399-1529 today.