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What It Means to Incorporate as a B Corporation

Think of it this way: a B Corporation does not strive to be the best business in the world, but rather to be the best business for the world.

B Corporations have never been the typical business entity. Most legal structures, such as LLCs and partnerships, submit basic information about their business and its background and pay a small fee in order to incorporate and legitimize their company. B Corporations[1] are a bit of a hybrid between a standard corporation and nonprofit. They are still for-profit structures, but B Corps are committed to meeting social and environmental performance, accountability, and transparency standards. Think of it this way: a B Corporation does not strive to be the best business in the world, but rather to be the best business for the world.

As such, the entity cannot be recognized as a certified B Corporation by the nonprofit B Lab until it has met specific performance and legal requirements. These requirements allow the legal structure to show, rather than tell, the world how it will use business as a force for good. If you are an entrepreneur that is seriously considering incorporating as a B Corporation, here’s a closer look at what goes into the certification process.

What are the performance requirements?

According to B Lab, there are more than 2,100 certified B Corporations from 50 countries and over 130 industries with offerings that range from vegan beauty products to gluten-free granola. The first step towards joining the B Corp community and redefining success in business?[2] Take the B Impact Assessment test.

This free test is designed to assess the impact of your business on its stakeholders, which varies from business to business depending on your company size, age, sector, and number of operating locations. While entrepreneurs do not need to study beforehand in order to take the test, they must be able to provide the best possible estimates for each answer. For those who are still unsure, questions may be marked “revisit this” in order to finish the test and get a rough B Impact score.

For a rough baseline, the B Impact Assessment test can take anywhere between one to three hours to complete.[3] Once the test has been finished, you will receive a B Impact Report with your overall score. A minimum score of 80 out of 200 points must be earned in order to meet the performance requirement.

If you receive at least 80 points, you will then be scheduled in for an Assessment Review with a member of the B Lab staff.[4] You must submit supporting documentation that details and demonstrates how your business will commit to benefitting the public. Additional supporting documents may be requested during this time, and your business is required to complete a Disclosure Questionnaire and subject to background checks from the B Lab staff.

What are the legal requirements?

Becoming a B Corporation means that there will now be an element of sustainability baked into the DNA of your company as long as you are in business. Before your business is certified, B Labs recommends covering the following bases:

  • Determine if you will need to amend your governing documents.[5] You may also choose to adopt a B Corporation status. This will allow you to meet the legal requirement for certification in the state where you incorporated your business.
  • For businesses with investors or board members, they must have a clear understanding about how adopting these legal changes can be useful for the business as well as any implications that could crop up.

After a business has been certified as a B Corporation, B Labs advises obtaining board approval of your planned amendment. Shareholder approval must be obtained for the board-approved amendment as well. Any entity that is incorporated as a corporation must also file their amended articles with their Secretary of State with a year.

After your business has met the performance and legal requirements…

You’re almost done! Sign the B Corp Declaration of Interdependence[6] and the B Corp Agreement and you will officially be a B Corporation. B Labs will even “Ring the Bell” to let the B Corp community know that you have joined the ranks of the entity taking action in order to “B the Change” in the world and the future of business.

B Corporation certification, as you can see, is far from being an intimidating process. B Labs even goes as far as to say that becoming a B Corp is as easy as 1-2-3! Once your business has incorporated as a B Corporation, you’ll find that your actions are doing more than making a difference in your own community. Your B Corp is also inspiring the next generation to take stock in their everyday actions. They want to disrupt the industry and be a part of the movement, too.

It’s a challenge to be a B Corporation. It’s a challenge to be an entity that is more transparent and held accountable for its actions than other companies. For entrepreneurs that are so passionate about their offerings and how they can benefit the public and environment, this is challenge that is gladly accepted.


Author of the article
Deborah Sweeney
Deborah Sweeney is the CEO of MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Deborah received her Juris Doctor and Masters in Business Administration degrees from Pepperdine University in 1999. Follow her on Google+ and on Twitter @deborahsweeney and @mycorporation.
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