Public Benefit Corporation Definition

Although the definition of a public benefit corporation can vary slightly between states, they all attempt to operate in a responsible and sustainable way. Any small business owner with a desire to make a positive change will want to learn more about a public benefit corporation’s definition and benefits.  

What is a public benefit corporation?

Merriam-Webster’s definition of a public benefit corporation is “a for-profit corporation whose purpose is to provide a benefit to society (such as improving the environment or promoting good health) in addition to making a profit for shareholders.” There are two types of public benefit corporations (or “PBCs”): governmental and private. Governmental public benefit corporations are created by government entities to provide some kind of free or low-cost service to the public. Private-public benefit corporations (also called “Benefit Corporations” or “B Corps”) are created by individuals or private groups. 

Most states now recognize B corps, and some state governments even grant them friendly tax treatment. However, not all states recognize public benefit corporations. At present, 13 states still do not recognize PBCs, but that number is changing. Also, know that the phrase “public benefit corporation” can have a slightly different meaning across various states. 

Public benefit corporations – considerations

Like any other legal entity in the business world, public benefit corporations have advantages and disadvantages. 

Public benefit corporation benefits

PBCs offer an extensive list of benefits. Here are the top advantages:

• Reduced liability for directors
• Increased ability to prioritize the public welfare
• Healthy access to private investment and capital
• Increased accountability for investors and the public

PBCs combine the best characteristics of corporations and non-profit corporations because they allow investors to gain financially while making the world a better place. Read more on how to turn your company into a PBC.

Public benefit corporation disadvantages

Unfortunately, public benefit corporations are not without their drawbacks. For one, their additional reporting requirements lead to significantly more restrictions and paperwork. And because PBCs are not universally recognized throughout the United States, their reach can be limited. Unlike limited liability companies, public benefit corporations still need to pay state and federal corporate income taxes. Finally, investments made in PBCs are generally not tax-deductible.

Business public benefit corporation – Examples

Now that we’ve covered the public benefit corporation’s business definition, advantages, and disadvantages, let’s review a few real-world examples.

#1 Kickstarter

Kickstarter first became a business in 2009. However, it reformed as a public benefit corporation in 2015. Aside from making money, it uses its status as a B Corp to provide easy crowdfunding capital and “help bring creative projects to life.”

#2 Patagonia

Like Kickstarter, Patagonia was originally not a PBC. That said, it became a B corporation in 2012 and earned the distinction of being the first B corporation in California. Thanks to its unique corporate structure, Patagonia aims to be carbon neutral by 2025. It also donates 1% of all of its sales to help restore the environment. 

#3 Ben & Jerry’s

Although it’s a subsidiary of Unilever, Ben & Jerry’s is itself a certified B corporation. In addition to making ice cream that is famous across the world, the company focuses on several social goals. These goals include reducing social inequality, minimizing negative effects on the environment, and using sustainable food production methods. 

Summary

Public benefit corporations are a type of legal commercial entity that allow their owners to make a profit and further the public good.