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"B"  Entrepreneurial: How the Emerging "B Corp" Movement Benefits Socially Conscious  Businesses

"B" Entrepreneurial: How the Emerging "B Corp" Movement Benefits Socially Conscious Businesses


B Legal Briefing
(January 23, 2014)

The benefit corporation movement – which includes "B Corps" that are legislatively recognized by their states' laws and companies that are privately certified by groups like B Lab® – is new, exciting, and dynamic. Getting involved in this movement is easier than you might think, and entrepreneurs across the country are leading the way.

By late 2015, at least 29 states (including Delaware, Florida, South Carolina, Tennessee and Virginia) and Washington D.C. had passed some form of benefit corporation legislation and at least 15 states (including North Carolina) had legislation pending or previously proposed. The Delaware and Colorado laws passed in 2013 are different from B Lab®'s Model Benefit Corporation Legislation (adopted by most states) in some important ways, such as their definitions of "public benefit" and their reporting and third-party assessment provisions. We don't know yet whether other states will stick with the model legislation approach, a Delaware-style approach, or some hybrid.

This new corporate form – or private certification – can be especially helpful to startups.  As Martin Zwilling points out  in 7 Benefits For Startups Joining The B-Corp Movement (citing ideas from the 2012 book, "Mind Your Business: Thoughts for Entrepreneurs," by international entrepreneur, Toine Knipping), startup companies can use the benefit corporation model to their competitive advantage in several ways.  They can attract investors who favor corporate entities that integrate social responsibility.  They can develop a broad, reliable consumer base, as customer loyalty is usually very high for socially conscious startups.  Socially conscious products usually sell at a premium, which can provide a steady source of profits in the startup phase. Finally, socially conscious companies typically have better organizational performance, because employees are loyal to the company's mission.  Human capital is usually retained for a longer period of time, reducing employee-retention and recruiting costs.  (See http://blog.startupprofessionals.com/2013/12/7-benefits-for-startups-joining-b-corp.html)

Our firm, Smith Moore Leatherwood, has formed a "Benefit Corporation Team" (informally dubbed our "B Team") to assist aspiring and existing benefit corporations.  Contact us to talk more about your legal options as you consider creating a "B Corp," re-incorporating as a "B Corp," creating a "B Corp" subsidiary, or identifying the legal issues arising from this new business model.

©2014.  Smith Moore Leatherwood LLP.  All rights reserved.

Authors
Lisa Frye Garrison
T (336) 378-5432
F (336) 433-7436
Associated Attorneys
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