A B is not…

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It’s come up again.  Can I set up a “B” corporation?   Can you help us set up a benefit corporation?   I’ve covered these entities in a few blogs, which is why I’m guessing our clients ask us about them.

I’m guessing it’s because of all the publicity that Etsy garnered.  Earlier in the month of April, it went public- and its stock price soared.

But, there are several facts one must recognize.  Organizing as a Benefit Corporation only stipulates that you plan to operate your company with regard for all the stakeholders- employees, stockholders, the community, the environment.   (By the way, that’s the way most corporations used to act and think before the social contract was abrogated when Martin Feldstein began his crusade in the 1970s to destroy that arrangement.)

But, Etsy was not only constituted as a B corporation, it obtain certification from B Lab.   That certification process is involved (it’s an online assessment with follow-up in-person examinations) – but it notifies the world that there’s more than just paper promises.  It demonstrates that a full action plan, a history of following-through exists- so the B designation is not just window dressing.

Of course, some firms undergo certification to promote their business, using it as a marketing device.  They want potential customers to see they plan to treat their employees right, to attract socially inclined investors, etc.  The certification process isn’t cheap- fees can range from $500 to $ 50000 or more- a year.

But, it’s not setting your company up as a charitable entity, as a legal entity which can accept donations from the public and afford them charitable donations.  Of course, a B corporation can apply for 501(c)3 status- but, to be honest, so can other business entities.

And, it doesn’t afford you the right to buy products and skip the sales taxes.  Oh, sure, the company can apply for such status from the state in which you operate, but the B company status doesn’t automatically afford that to your company.

So, apply for the B status if you want to be a good employer.  I personally believe you should be an ethical employer and corporation-regardless of your corporate genesis.

But, the one thing you can expect from a B status entity?   The fact that your company does not make a (taxable) profit for 3 of every 5 years won’t be setting you up for an IRS audit.  Because B entities are probably using more of what would have been profits to benefit the community, the environment, their employees, and the world.

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