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B-Corp and Social Entrepreneurship

Did you know that Colorado is considering legislation approving the Benefit Corporation entity form?  Did you also know that currently 11 states have passed similar legislation, and more are in the works?  Colorado is currently home to 6 certified “B Corporations” or “B Corps,” designated as such by the third-party non-profit B Lab.

Not only are DRC attorneys committed to the well-being of our clients’ business ventures, but we are seeking the well-being of our community, too.  When those two passions coincide, a B-Corp is formed, and we are afforded the rare, warm-and-fuzzy opportunity to challenge the divisive and misplaced reputation of attorneys and spread some good in our community (“for once”).  Welcome to the world of B-Corps.

The following article from Small Business Trends provides an excellent job or describing B-Corps and the associated benefits:

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Should You Become a B Corp?
By:  Kelly Spors
August 13, 2012

When most businesses think about incorporating, they consider S corps, C corps or LLCs. But there’s an emerging alternative for business owners who want to tie their corporate goals to not just finances, but societal good.

The B Corp, officially called Benefit Corporation, is a legal structure that requires businesses to not only generate profits but also create social and environmental benefits.

Starting with Maryland in 2010, eight U.S. states now offer the B Corp structure and several more are considering legislation to adopt it. (A nonprofit called B Lab, which advocates for B Corp laws, also allows any business to be voluntarily certified as a B Corp.)

Some states have also adopted other similar types of corporate structures, including flexible purpose companies (FlexC) and low-profit LLCs (L3Cs). Check out this slideshow by Harvard adjunct professor Kyle Westaway to learn more about these different structures.)

Under the state laws, B Corps must include social and environmental goals in their bylaws and put out an annual report that explains how well they’ve performed those goals. It’s a way to ensure that the business is just as committed to generating social and environmental good as it is to generating profits.

As the B Corp structure gets more acceptance, more businesses are using it to show their commitment to environmental and social strong practices. Outdoor apparel company Patagonia incorporated as a B Corp in California early this year. Read this Wall Street Journal piece about several other companies that have as well.

Becoming a B Corp. offers several potential benefits to businesses that care about sustainable business practices. Here are a few to consider:

  1. Walking the talk. Being a B Corp. is another way to show your customers your genuine commitment to ethical business practices. Not only are you promising, but your legal structure requires it.
  2. Continuity of commitment.Once you’ve incorporated as a B Corp., you and future owners of your business will be bound to following the rules. It’s a way to ensure the commitment you’ve made to sustainable practices extends well into the future
  3.  Standing out. Businesses with a B Corp structure stand out from competitors by showing a higher level of commitment to environmental or social responsibility.

All said, however, not everyone is convinced that B Corps are worth it. Environmental and social goals can certainly be attained without the B Corp structure. Some critics also worry how B Corps will be viewed by potential investors who might be looking at the financial implications of being a B corp.

What do you think about B Corps? Have you considered a B Corp structure for your business, or would you?

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Submitted by Anna E. Lineberger, Esq.