B Corp and a Benefit Corporation are Not Created Equal

B Corporation is a non-profit certification from B-Lab, a company that supports the legal structure Benefit Corporation

B Corp is just short hand for a Benefit Corporation, right? Not quite. Although there are similarities between the two in name, and in spirit, there is a crucial difference. B Corp is a certification and a Benefit Corp is a legal entity. Let me explain.

The Confusion Between B Corp and Benefit Corporations
First off, let’s talk about the confusion. If we look at the description of a B Corp and a Benefit Corporation, both are extremely similar.

“Certified B Corporations are a new type of corporation which uses the power of business to solve social and environmental problems.” – B Corp

“Benefit Corporations are a new class of corporation that are required to create a material positive impact on society and the environment and to meet higher standards of accountability and transparency.” – Benefit Corporation.

Confusing? Yes. Both seek to benefit society and the environment. So then what is the difference?

B Corp – The Certification
B Corp is a certification offered by a non-governmental organization named B Lab. (I know, alphabet soup confusion!) There is no state legislative mandate or structure, per se.

Rather, companies wishing to become a Certified B Corp fill out an Impact Assessment. A company not only has to meet certain social and environmental criteria, but provide support documents to become fully certified. Furthermore, company bylaws must eventually be amended to include stakeholder interests. The change in bylaws will make the company strikingly similar to a Benefit Corporation in corporate structure.

Benefit Corporation – A State Legal Entity
A Benefit Corp is a state government legal corporate structure. It is a way to legally structure a company like an LLC, S-Corp, or C-Corp. Benefit Corporation status will allow companies to embed their sustainable principals into their DNA. In some ways, this is just a more straighfortward version of what B Lab is trying to do with the B Corp certification.

The California Legislature recently passed legislation to allow companies incorporated in the state to be Benefit Corporations. The nuances of the bill may differ from state to state in order to accommodate each states unique legal structure.

Yet, the heart of the the Benefit Corporation is the same across the board. Rather than a corporation focusing on just profit for the shareholders, a Benefit Corporation is required to focus on the public benefit (hence the name Benefit Corporation.)

Only five states have the Benefit Corporation as an option when incorporation in that state: Hawaii, VIrginia, Maryland, Vermont, New Jersey. Six more states are in the process of making it part of their states corporate legal system: Colorado, New York, North Carolina, Pennsylvania, California, and Michigan.

On a side note, just to clear up even more confusion, B Lab, creator of the B Corp certification also advocates for such legislation.

B Corp or Benefit Corporation?
Now that we have cleared up the difference between B Corp and Benefit Corporations, can a company be both a B Corp and a Benefit Corp? The answer is yes, granted you meet the requirements of certification and incorporate in a state that has a Benefit Corp entity.

What do you think? Are B Corp and Benefit Corp complementary? Or does it just confuse folks? Should more and more companies seek to adopt one or the other?

Jonathan Mariano is an MBA candidate with the Presidio Graduate School in San Francisco, CA. His interests include the convergence between lean & green and pursuing free-market based sustainable solutions.