Taylor Legal Blog

What is a B Corporation?

Posted by Katherine L. Taylor, Attorney and CPA, Chief Problem SolverJan 07, 20190 Comments

Benefit Corporations (also known as B Corps) are corporations formed with the intent to create a beneficial public good. B Corps are held to a higher standard than traditional corporations in that they must create social, environmental and community benefits. The first official B Corp was created in 2007, when Method, a manufacturer of green cleaning products, amended their corporate documents to reflect their intention of benefitting the public good through their business practices. Maryland became the first state to create a separate legal entity for B Corps in April 2010.

B Labs, is a non-profit which provides certification as a B Corp to qualified business applicants. The goal of B Labs is to prevent corporations from “greenwashing”, by providing a third-party stamp-of-approval for businesses that are actually fulfilling their claims. Certification is a stringent process, which requires passing B Labs B Impact Rating System. Applicants fill out a 220 question survey with questions delving into things such as recycling practices, employee demographics, community involvement, and employment benefits. B Labs compiles the results, and after tallying the points, grants certification to companies that have met the minimum passing rate.

On B Labs website, the organization features highlights of some corporations which have passed certification. Emphasized areas include employee demographics, sustainable environmental practices, and community involvement. For example, B Corporation says Method has “>50% women” as employees, has “>50% facilities LEED certified”, and that “>50% employees participate in company-wide service days”.

B Labs certification is not required for a Maryland company to register as a B Corp, but it certainly helps for the business to prove that the requirements of the Maryland law are being met. Additionally, certified B Corps can obtain discounted goods and services from other certified B Corps.

There are currently no tax incentives for B Corps at either the federal or state level.Philadelphia recently instituted a tax break for B Corps, a move that is expected to inspire other municipalities to offer similar incentives. Additionally, it is not unreasonable to assume that state and federal tax law will eventually be amended to reflect the unique nature of B Corps.

If you have any further questions about how becoming a B Corp can benefit your business, please feel free to contact our office.