Home Law What is a Public Benefit Corporation? And Why they are Important

What is a Public Benefit Corporation? And Why they are Important

Public benefit corporations (PBCs) are for-profit entities allowing their owners to profit while pursuing a public benefit(s). Below, we discuss the importance of PBCs so you can decide whether to form a PBC or take the more traditional non-profit route. 

Importance of Public Benefit Corporations

1: Public Good as a Priority

Public benefit corporations seek to promote the public good. As such, their public benefit purposes are mandated in their formal documents, allowing them to prioritize public good and the secondary goal of making a profit. 

2: Encourage Social Responsibility

When your company is a public benefit corporation, it holds you, your employees, and your practices accountable for environmental and social responsibility. Consumers have significantly increased their interest in sustainable companies and want proof of these companies’ social efforts. 

To improve customers’ perception of your company, you can embrace social responsibility and take up practices such as investing in environmental and social initiatives, practicing ethical labor, and promoting philanthropy. 

3: Attract Socially Conscious Employees

Knowing your company is trying to positively impact local and global communities attracts top talent that shares the same objectives. 

Moreover, registering your company as a public benefit corporation validates your employee-centric culture, meaning you can also retain top talent. 

4: For-Profit Activities

Unlike non-profit organizations, public benefit corporations are for-profit corporations, just like C corporations or limited liability companies (LLCs). It means public benefit corporations can still pursue profit as one of their purposes and participate in for-profit activities, which non-profit organizations cannot do. 

5: Director’s Liability

The board of directors can make decisions to further the public good at a public benefit corporation without fear of liability. Even better, they can make such decisions even if they might affect profits. 

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6: Promote Accountability

Public benefit corporations make boards more accountable. Boards must consider social and environmental factors in addition to stakeholders’ financial interests. It gives directors the legal protection to implement strategies and consider the impact of their practices on society and the environment.    

7: Promote Transparency

Public benefit corporations must publicize their progress to consider a triple bottom line — people, planet, and profit. Reporting requirements vary from state to state. However, most states require public benefit corporations to use a third-party standard to report to the public and measure their performance. 

8: Create Public Benefit

The underlying purpose of public benefit corporations is to create public benefit. Public benefit is an obligation to operate responsibly and sustainably or the implementation of practices that positively impact society and the environment. 

9: Protect Company Missions

When you register your company as a public benefit corporation, you protect its mission(s) through leadership changes and capital raises. 

Register Your Business as a Public Benefit Corporation 

As you can see, registering your business as a public benefit corporation benefits you, the public, and the environment. It also makes your business more attractive to socially conscious consumers, helping you generate profits while contributing to the public good.