Social Entrepreneurship: September 2009 Archives

With the growth in interest in social entrepreneurship, I am often asked about the status of the B Corporation.  B Corporations is a designation for a for-profit venture that has a social mission.

Here is the latest from Nonprofit Law Prof Blog:

The B Corp concept (B stands for social benefit) has not yet, so far as I know, been adopted by any states, but corporations can dedicate themselves to a socially responsible future by registering with B Lab, a nonprofit organization, and agreeing to comply with its dictates such as committing irrevocably to socially responsible business activities,taking cognizance of stakeholder concerns, and conducting an annual social benefit audit and report.  If the corporation complies, it receives what in essence a Good Housekeeping Seal of Approval from B Lab and can describe itself as a B Corp.

So as of now, this is not an alternative legal form of business entity like an S-Corp or LLC.  However, there is lobbying going on in Washington to set up a separate tax category or special tax break for B Corporations.  If this happens the states will surely follow and recognize this category of business as a new way to charter a corporation.

I think this would be a bad move.  Many social entrepreneurs who choose to set up their venture as an S-Corp or LLC and by-pass non-profit status do so to avoid the hassles of setting up and running non-profits.  If we turn the government and specifically the IRS loose on a new form of legal business entity called B-corps, they will become part of the morass that makes up the 70,000 pages of IRS code.  I would predict that in a few years we might see thousands of new pages of code dedicated just to B-corps.