Making a Difference (and a Profit): Advantages and Disadvantages of Forming or Converting into a “B” Entity
April 30, 2018
Authored by: Aaron Ginsburg
With the creation of “B” Entities, businesses no longer need to choose between shareholder value and social impact. Under traditional corporate structures, directors have a fiduciary duty to maximize corporate profits and “shareholder value,” which can drive companies to focus more on short-term earnings than their communities and the environment. “B” Entities, on the other hand, refer to a corporate structure or private certification that requires directors to consider the social and environmental impact of their decisions in addition to the shareholders’ pecuniary interests. “B” Entities can therefore be compelling for new businesses seeking to prioritize social good or for existing companies trying to demonstrate a commitment to running a sustainable, socially responsible business.
There are two types of “B” Entities: “Benefit Corporations” and “Certified B Corporations.” A company can be a Benefit Corporation or a Certified B Corporation or both.
A Benefit Corporation (also known in some states as a “Public