AN ENTREPRENEUR’S GUIDE TO CERTIFIED B CORPORATIONS AND BENEFIT CORPORATIONS
ENDNOTES
1. There are various derivatives of
the Benefit Corporation, although they
are sometimes used interchangeably,
including: Public Benefit Corporation
(Delaware, Colorado), Social Purpose
Corporation (Washington, Florida,
California), and Benefit LLC (Maryland).
2. Owners of corporations are called
shareholders, whereas owners of LLCs
are called members.
3. Milton Friedman, The Social
Responsibility of Business is to Increase
its Profits, N.Y. Times (Sept. 13, 1970).
Friedman’s work also contributed heavily
to the “Chicago School of Economics”
movement, which rejected Keynesian
economic thought and emphasized free
market principles.
4. For a more in-depth discussion on
this countervailing position, see Lynn
Stout, The Shareholder Value Myth:
How Putting Shareholders First Harms
Investors, Corporations, and the Public
(2012).
5. The legal predecessor to the
Benefit Corporation is the constituency
statue, which has been around for
decades. Most constituency statutes
were introduced into law in the 1980s in
response to the corporate merger and
acquisition craze. Constituency statutes,
while varying in scope, state that cor-
porations may consider stakeholders’
interests other than shareholders in
company decision-making. Notably,
such decision-making was arguably
permissible under a separate legal the
Business Judgment Rule before constit-
uency statutes emerged. The Business
Judgment Rule is a long-standing legal
standard where courts will make the
presumption that corporate directors
have acted on an informed basis, in
good faith, and in the honest belief
that the action taken was in the best
interest of the company. Constituency
statutes took this rule to the next level,
affording corporations greater legal
protection when considering stakehold-
ers’ interests before shareholder profit in
corporatedecisions.
6. The country of Italy also recognizes
Benefit Corporations. State by State
Status of Legislation, BenefitCorp.Net,
http://benefitcorp.net/policymakers/
state-by-state-status (last visited Oct.
23, 2016); Italian Parliament Approves
Benefit Corporation Legal Status,
BCorporation.EU, http://bcorporation.eu/
blog/italian-parliament-approves-bene-
fit-corporation-legal-status (last visited
January 26, 2017).
7. How Do I Create General Public
Benefit, BenefitCorp.Net, http://
benefitcorp.net/businesses/how-do-i-cre-
ate-general-public-benefit (last visited
June 18, 2016).
8. Only Delaware and Colorado require
that a company identify a “specific ben-
efit.” In Minnesota, companies have the
option of electing to be a General Public
Benefit Corporation or a Specific Benefit
Corporation—and the trend appears to
be towards the latter.
9. Certified B Corporations must
satisfy B Lab’s third-party standard,
whereas Benefit Corporations can
satisfy any third-party standard, but it
is not required—this requirement varies
by state. It is worth noting that with
respect to Benefit Corporations, B Lab’s
model legislation states as follows:
“Government has no role in determining
whether a selected third party standard
is acceptable or whether the benefit cor-
poration has met its benefit corporation
purpose to create a material positive
impact; Benefit [C]orporations are not
required to adopt a specific third party
standard; and Benefit [C]orporations are
not required to be audited or certified by
any third-party standards organization.”
How Do I Pick a Third-Party Standard?
BenefitCorp.Net, http://benefitcorp.net/
businesses/how-do-i-pick-third-party-
standard (last visited June 29, 2016).
10. J. Haskell Murray, Corporate Forms
of Social Enterprise: Comparing the State
Statutes, https://papers.ssrn.com/sol3/
papers.cfm?abstract_id=1988556 (Jan.
15, 2015); Christopher Wirth, Benefit
Corporation Reporting Requirements,
Drinker, Biddle & Reath, LLP, http://bene-
fitcorp.net/sites/default/files/Benefit%20
Corporations%20Chart.pdf (June 10,
2015).
11. Corporation Legal Roadmap,
BCorporation.Net, https://www.
bcorporation.net/become-a-b-corp/how-
to-become-a-b-corp/legal-roadmap/
corporation-legal-roadmap (last visited
June 23, 2016) (noting that in states
where there is no constituency statute
or benefit corporation statute, “the best
[B Lab] can do [] is [] build the language
of the [Benefit Corp] legal framework
into your Term Sheet for B Corp
certification.”).
12. “[C]ompanies must elect benefit
corporation status within four years of
the first effective date of the legislation
or two years [] [after] initial certification,
whichever is later.” Id.
13. Id.
14. What are B Corps, BCorporation.Net,
https://www.bcorporation.net/what-are-b-
corps (last visited Nov. 21, 2016).
15. Steps for Start Ups, BCorporation.
Net, https://www.bcorporation.net/
become-a-b-corp/how-to-become-a-b-
corp/steps-start-ups (last visited Nov. 21,
2016).
16. Id.
17. Id.
18. Notably, if a company incorporates
in a state that recognizes Benefit
Corporations or has a constituency stat-
ute, but primarily carries out business in
another state and is subsequently sued
in that other state, the court would likely
follow the law of the state in which the
company incorporated, citing the “inter-
nal affairs” doctrine.
19. Benefit Corporations & Certified
B Corps, BenefitCorp.Net, http://
benefitcorp.net/businesses/benefit-corpo-
rations-and-certified-b-corps (last visited
Nov. 19, 2016); Certified B Corps & Benefit
Corporations, BCorporation.Net, https://
www.bcorporation.net/what-are-b-corps/
certified-b-corps-and-benefit-corpora-
tions (last visited Nov. 19, 2016).
20. Id; Term Sheet for B Corporations,
BCorporation.Net, available at https://
www.bcorporation.net/sites/all/themes/
adaptivetheme/bcorp/pdfs/2012_term_
sheet_non-constituencynon-benefitsub.
pdf (last visited Nov. 19, 2016).
21. Performance Requirements,
BCorporation.Net, https://www.
bcorporation.net/become-a-b-corp/
how-to-become-a-b-corp/performance-re-
quirements (last visited January 30,
2017).
22. Id.
23. Benefit Corporations & Certified B
Corps, supra note 19.
24. Notably, the compliance rate on
Benefit Corporation submitting this
annual report is less than ten percent.
See generally J. Haskell Murray, An Early
Report on Benefit Reports, SSRN (2015),
available at http://papers.ssrn.com/sol3/
papers.cfm?abstract_id=2682709.
25. LLCs, unlike C-Corps, are not
required to have a board of directors and
its management structure varies.
26. Ryan Honeyman, The B Corp
Handbook: How to Use Business as a
Force for Good, 16 (2014).
27. Dermot Hikisch, Values-based
Businesses Demonstrating Resilience,
TriplePundit.com, http://www.triplepundit.
com/podium/values-based-business-
es-demonstrating-resilience/ (Aug. 24
2013).
28. Cliff Zukin & Mark Szeltner, Net
Impact and Rutgers University, Talent
Report: What Workers Want in 2012;
Net Impact, available at https://www.
netimpact.org/sites/default/files/docu-
ments/what-workers-want-2012.pdf (May
2012); Eccles, Robert G. Ioannis Ioannou
& George Serafeim, The Impact of a
Corporate Culture of Sustainability on
Corporate Behavior and Performance,
Harvard Business School, available at
https://hbr.org/2016/03/founder-led-com-
panies-outperform-the-rest-heres-why
(2011).
29. Most states require that companies
make these reports publicly available—
only Delaware and Minnesota do not.
However, there is no penalty currently
for a company that fails to make its
report publicly available.
30. Find a Benefit Corporation,
BenefitCorp.Org, http://benefitcorp.
org/businesses/find-a-benefit-corp (last
visited June 26, 2016); BCorporation.Net,
https://www.bcorporation.net (last visited
Dec. 19, 2016).
31. Id.
32. Honeyman, supra note 25.
33. Benefit Corporations Raising Capital,
BenefitCorp.Net, http://benefitcorp.net/
benefit-corporations-raising-capital (last
visited June 18, 2016).
34. JP Morgan & Rockefeller
Foundation, Impact Investments: An
Emerging Asset Class, https://www.
rockefellerfoundation.org/report/
impact-investments-an-emerging-
asset-class/ (Nov. 29, 2010); Morgan
Stanley, Sustainability Through
the Eye of the Investor, http://www.
morganstanley.com/ms-articles/sus-
tainability-in-the-eye-of-the-investor/
(Feb.27, 2015).
35. James Woulfe & Emma Sifre, Social
Enterprise Law Working Group Policy
Recommendations & Explanations,
https://www.cga.ct.gov/ba/CTLCBL/docs/
Soc.%20Ent.%20Law%20Report.pdf.
36. Goldman Sachs, Report, available at
http://www.natcapsolutions.org/business-
case/GoldmanSachsReport_v2007.pdf
(2007).
37. Chris Zook, Founder-Led Companies
Outperform the Rest—Here’s Why,
Harvard Business Review, https://
hbr.org/2016/03/founder-led-compa-
nies-outperform-the-rest-heres-why
(March24,2016).
38. Big Demands and High Expectations:
The Deloitte Millennial Survey,
Deloitte, http://www2.deloitte.com/
content/dam/Deloitte/global/Documents/
About-Deloitte/gx-dttl-2014-millenni-
al-survey-report.pdf (January 2014).
39. Loan Forgiveness Program, Yale
School of Management, http://som.yale.
edu/programs/mba/admissions/financ-
ing-your-mba/loan-forgiveness; Loan
Assistance Program, NYU Stern School of
Business, http://www.stern.nyu.edu/sites/
default/files/assets/documents/2015%20
LAP%20Application%20FINAL.pdf; Loan
Assistance Program, Columbia Business
School, http://www8.gsb.columbia.edu/
socialenterprise/careers/loanassistance
(it is unclear why Benefit Corporation is
also not listed as a qualifying entity for
Yale or NYU—Columbia’s loan forgive-
ness program, alternatively, includes
“social purpose for-profit ventures or
businesses.”).
15