If you’re a social entrepreneur that wants to change the world with your org, you almost certainly want to go with either a B corp or a non-profit.
Non-Profit or B Corp?
- Is your venture scalable, i.e. probably *not* a “lifestyle business”?
- Will you likely need investors that will require an exit or liquidity event?
If your answer to either of those is no, a non-profit is probably best.
If your answer to either is yes, your business is scalable or you will likely need investors; a B corp may be the best option.
B Labs’ B Corp vs. State B Corps
When people talk about B corps there are actually two different definitions that can lead to some confusion. B corps (Benefit Corporations) are legally defined corporate entities that are required to provide some sort of public benefit, as recognized in five states at the time of this writing: Vermont, Maryland, Hawaii, Virginia, and New Jersey.
Those legally defined B corps require some form of 3rd party independent social benefit audit, a service B Labs (http://www.bcorporation.net/) provides, but using B Labs isn’t required to be a B corp.
When some people use the phrase B corp they are referring to a B Labs certified B Corp, which from a legal perspective may still actually be an S or C corp! In that sense a B Labs B Corp is a sort of brand or certification. The B Labs’ version of B Corps came first, and some people may not be aware of the new legal structure offered by states, which leads to the confusion.
Your B corp doesn’t necessarily have to work with B Labs, but they do seem to be the biggest provider of the auditing service that I’m aware of.
I’m not a lawyer, but forming as a state recognized B corp will likely give you better legal protections (whether or not you use B Labs for your audits) than a B Labs certification on top of a S/C corp.
Ultimately the purpose of a B corp is to protect a do-gooding company from being sued by a profit-centric shareholder. If that happens it’s better to have a state law AND a contract on your side than just a contract alone.