# Benefit Corporation ## [[Wikipedia]] [Article](https://en.wikipedia.org/wiki/Benefit_corporation) ### Intro As a matter of law, in the 36 states who recognize this type of business form, ==a benefit corporation is used "to merge the traditional for-profit business corporation model with a non-profit model by allowing social entrepreneurs to consider interests beyond those of maximizing shareholder wealth."== ### Benefits Benefit corporation laws address concerns held by entrepreneurs who wish to raise growth capital but fear losing control of the social or environmental mission of their business. In addition, the laws provide companies the ability to consider factors other than the highest purchase offer at the time of sale, in spite of the ruling on Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc. Chartering as a benefit corporation also allows companies to distinguish themselves as businesses with a social conscience, and as one that aspires to a standard they consider higher than profit-maximization for shareholders.[30] Yvon Chouinard, founder of Patagonia, has written "Benefit corporation legislation creates the legal framework to enable companies like Patagonia to stay mission-driven through succession, capital raises, and even changes in ownership, by institutionalizing the values, culture, processes, and high standards put in place by founding entrepreneurs."[31] ### Public benefit corporation vs. certified benefit corporation There is a difference between being filing as a public benefit corporation in a state, and being a certified benefit corporation also known as a B Corporation. B Corporations voluntarily promise to run their firm with social and environmental causes as a concern.[32] To receive their certification from B Lab they must score a minimum of 80 out of 200 on a survey called the B impact assessment.[32] Next, they will have to pass through an audit process.[32] Finally, the firms wishing to remain certified will be required to pay an annual fee to B Lab.[32] Furthermore companies will pledge to incorporate as a public benefit corporation before their re-certification.[32] ### Taxation A public benefit corporation is a legal entity that is organized and taxed as either an S corporation or C corporation.[32] Founders will want to keep in mind that C-corporations experience a double tax associated with profits and again with dividends or payouts to shareholders.[33] S corporations are a legal entity that escapes this double taxation but there are certain stipulations that an entity will have to consider before being able to file as an S corporation.[33] ## [What is a Benefit Corporation?](# What is a Benefit Corporation?) https://benefitcorp.net/ ## [Why we run a for-profit, mission-based business](https://fairanita.com/blog/why-we-run-a-forprofit-missionbased-business/) (Selected excerpts) **Public Benefit Corporation: what it is and what it isn't.** In January 2015, we incorporated as one of the first Public Benefit Corporations (PBC) in the state of Minnesota. This means that, legally, we're an organization that's both for-profit and mission-driven (for-profit and for-good, as we like to say!).  When we incorporated, we had to state our mission, and every year, we have to release an Annual Benefit Report which measures our success in achieving our mission over the last year.  This is all public information and monitored by our state government.  Look for our 2nd Annual Benefit Report, coming soon!  There are zero tax incentives to incorporate as a PBC. For us, there are two incentives:  1. Proving to our customers that our mission is what we're all about, even if we're bringing in revenue. 2. If we decide to take on investors in the future, there is a level of protection for our artisans.  If future investors want us to be more profitable, they can say "you need to sell more," but not, "you can make more money by cutting costs to artisans."  Since providing fair wages and sustainable jobs to women around the world is our mission, it's important to us to have this layer of legal protection. **We believe for-profit business can be more sustainable.** We love non-profit organizations.  We really do.  There are some organizations out there doing phenomenal work that we certainly admire. However, as someone who has worked at multiple nonprofit organizations, I have also seen the hardships that nonprofits face: the need to chase down grants in order to fulfill your mission.   I am a stubborn person.  I also consider myself to be very efficient. I don't like doing unnecessary work, and I don't like spending my time doing things that I don't think I should have to do. I started to see a lot of this in the nonprofit world-- brilliant ideas, great intentions, and amazing people motivated to change the world... but then their actions would be stalled by the reality of needing funding before being able to achieve their mission. Instead of fully focusing on their mission, they'd need to spend their time chasing down grants, and occasionally changing their vision to match funders' requests. Or in some sad situations, programming stops altogether because a donor is no longer providing funding. We are not a charity.  We're not giving handouts to women around the world (well, we sometimes do, but it's certainly not the core of who we are). We aim to provide sustainable, well-paying jobs for women so they can pull themselves out of the cycle of poverty through financial security.   By selling our products, we're able to easily achieve this mission.  When we focus on creating sales channels in the US, we're achieving this mission.  When we work with our artisan partners on design, we're achieving this mission. I'm lucky to say that we're able to fully-focus on this one single mission every day. That being said, I also realize that this isn't an option for all organizations.  Our business structure is such that we could easily be a non-profit or a for-profit.  Not all mission-driven organizations have the option to make self-generated revenue their main source of income.  While I'm certainly an advocate for all non-profit organizations to seek revenue-generating activities, I know that grants are a vital part of how many organizations operate. **The downsides, as we see them.** For the most part, we love our Public Benefit Corporation status.  There are a few potential downsides that to share, just to keep in mind if you're thinking of starting a mission-based organization.  First, as a for-profit organization, we can't offer tax-deductible donations or apply for grants.  It's not a big deal to us, but it can be to others.   Second, our new incorporation status can be scary to potential investors, as it means we value our mission just as much as we value profitability.  If an investor is just looking for a top-dollar payout, they might not be interested.  While at Fair Anita we currently don't have any investors, we know that if we decide to pursue this in the future, we'll be looking for investors that want the double ROI (return on investment)-- for themselves and for their community.  Lastly, sometimes we get backlash for being a for-profit organization because we're not giving 100% of all revenue to artisans-- unfortunately, there are some people who feel that we're not being true to our mission. While I can see where they're coming from, it's just not a realistic expectation. I need to pay my incredible staff here in the US, and the margins we make on products allow us to continue purchasing from artisan partners around the world. I hope that this assumption that for-profit business means bad/unethical business will change as more mission-driven, for-profit businesses prove otherwise!