“B” Corps

published June, 2012

I was asked about “B” Corps at the Women’s Initiative for Self Employment when I presented a seminar there recently. This is not an official designation from a tax perspective, it is a “certification” that the company meets certain requirements to be socially responsible, and has taken measures to ensure their articles or partnership agreement will not restrict the company from pursuing social goals—which normally might be dictated by the company documents—and a corporation, LLC or sole proprietership can be certified. No tax change, more like a “we’re BBB diamond certified” sort of a designation.

Here’s some info on the “B” Corp” copied from NY Times 4/11/11 by Tina Rosenberg:

“To become a certified B Corp, or benefit corporation, a business must pass an examination of how it treats its employees, the environment, and the community. A non-profit organization called B Lab sets out the requirements and certifies businesses that meet the standard. The idea is that while any company can claim to be a good corporate citizen, a B Corp can prove it—something valuable for consumers and investors.

“B Corps must also procure shareholders’ agreement for a revision of the bylaws to allow business decisions to consider the impact not only on shareholders, but also the workforce, community, and the environment. Shareholders are allowed to sue if they feel the directors aren’t doing enough to take social responsibility into account.

“A B Corp can turn down a high bid in favor of a buyer more committed to responsible behavior without worry of lawsuits. The change also solves other problems faced by mission-driven companies. ‘The top concern we hear is “I’m scared to take in outside money because I’m going to be pushed to do things I don’t want to do,”’ said Jay Coen Gilbert, one of the founders of B Corp. ‘That sort of fear often makes companies not want to take in outside capital, which restricts their growth.’ The changes in bylaws can give small businesses the assurance they need to be able to grow.”

There is a non-profit, B Lab, that does the certification, and they do an on-site review of 10% of the companies they have certified every year, and if you don’t pass your inspection, you have 90 days to correct problems they’ve identified, or you’ll lose your certification.