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What Is a B Corporation?

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Definition:

You may be familiar with the three kinds of corporations that have been available in most of the U.S. They are the C corporation; the S corporation, and the LLC or Limited Liability Company.

The most recent form of corporate structure is the B Corporation, otherwise known as a "Benefit Corporation."

A B Corporation's charter requires the company to conform to socially-beneficial practices. These practices can include protecting the environment or preserving employee benefits. The establishment of B Corporations grew out of the growing interest in socially responsible investing, corporate social responsibility, and social entrepreneurship.

B Corporations seek the tax benefits of a nonprofit corporation within a business structure that seeks a profit even while providing desirable social benefits. Some states have passed legislation to provide these tax benefits to B Corporations.

A B Corporation is, thus, a kind of hybrid business organization, bridging the gap between profit and nonprofit.

The B Lab Company sets the standards for B Corporations and evaluates whether an organization is in compliance with the B corporation goals.

To become a B corporation, an organization must be certified by B Lab and:

  • Receive a minmum score of 80 (out of 200) on the B Ratings System
  • Agree to make certain legal changes to its articles of incorporation
  • Remit an annual licensing fee to B Lab

Visit B Lab for more information about the requirements, process, and application process. B Lab also maintains a list of certified B Corporations.

Related:

Also Known As: Benefit Corporation

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