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What is the difference between a B Corp and a benefit corporation?

FormationPublic benefit

A benefit corporation is a corporate form: a company incorporated under a state statute that requires its directors to pursue a public benefit as well as profit. A B Corp, properly Certified B Corporation, is a label: a certification granted by B Lab, a nonprofit, to a company that scores at least 80 of 200 points on its B Impact Assessment and meets its legal requirements. One is what a company is; the other is a badge a company earns. The confusion is understandable because B Lab drafted the model benefit corporation statute, and it now requires a certified company to adopt the benefit corporation form where its state offers one, so a Delaware B Corp is also a PBC.

Benefit corporation

Created by filing or amending a certificate of incorporation. In Delaware that means naming a specific public benefit in the charter, a board that balances it against stockholder returns, a report to stockholders every two years, and a right for 2 percent stockholders to sue on the balancing duty. No fee beyond the state's filing fees, no assessment, no outside body involved.

Certified B Corp

Granted by B Lab after a self-reported assessment of governance, workers, community, customers and environment, with a sample of certified companies audited on site each year. There are annual fees tiered by revenue, from a few hundred dollars for a small company upward, and a recertification every three years. The legal requirement depends on the entity: a Delaware corporation must convert to a PBC; an LLC must amend its operating agreement to require its managers to consider stakeholders; corporations in states without a benefit statute amend their charters. In return the company can use the B Corp mark and join a community of several thousand certified companies, Patagonia and Ben & Jerry's among them.

Which one you want

A company that wants the mission legally embedded and does not care about the badge becomes a PBC and stops there. A company that wants the badge for its customers and recruiting gets certified, and in Delaware becomes a PBC along the way. A company can be a PBC without ever certifying, and many are. It cannot be a Certified B Corp in Delaware without being a PBC.

Written by the lawyers who built Arabella. This is legal information, not legal advice for your situation, and reading it does not make us your lawyers. For a real dispute or a high-stakes decision, talk to a licensed attorney. More questions.