The following is a guest post by Patricia A. Harris, Esq., Founder and CEO, LicenseSure LLC.
This past week Patti and her colleague joined the members of the Entrepreneur Architect Academy and me on our weekly private member video conference, where we discussed several legal issues including records management, hiring and business entities. The information that Patti shared was very valuable to the members attending, as well as those who will watch the video of the recorded session.
This week, here on the blog, Patti is sharing her knowledge about Benefit Corporations. I have written about the B-Corp in the past, but this article dives deeper and provides you with all you need to know about this new business structure.
Please leave a comment below and let me know your thoughts. Have you considered launching a B-Corp? Do you think its a good idea?
Benefit Corporations: Do Good and Do Well
Recently, I have been chatting with numerous members of the design community about Benefit Corporations (or B-Corps) and have been met with an equal number of blank stares.
The Benefit Corporation movement is gaining momentum daily; 26 states plus the District of Columbia will have legislation authorizing B-Corps by the end of 2014, while 12 additional states have legislation pending. [1]
What is a Benefit Corporation?
The Benefit Corporation is considered a hybrid of a for-profit corporation and a not-for-profit in that the directors do not run the corporation solely to maximize corporate value for its shareholders. Rather, a Benefit Corporation commits to taking on social and environmental responsibilities in addition to its primary business purpose.
The B-Corp adopts in its articles of incorporation a commitment to socially or environmentally beneficial practices, usually by committing to operate for general public benefit and it may also adopt specific beneficial purposes such as preserving the environment or improving human health. [2]
It is the role of directors that most distinguishes B-Corps from other for-profit corporations. Directors are accountable for fulfilling the social and environmental purposes of the B-Corp. Legally, the obligations of the directors are broadened from the single duty of maximizing shareholder value to decision-making that considers a multitude of other stakeholders, which may include the firm’s employees, its customers, the community and the environment.
Transparency and accountability are also features of the Benefit Corporation model. B-Corps are typically required to publish annual reports assessing their social and environmental impact on their websites and, in some cases, file such reports with the state in which they are incorporated. This impact must be measured by an independent third-party standard, e.g., B Lab, Global Reporting Initiative (GRI), GreenSeal to name a few.
What are the Benefits of a Benefit Corporation (or is that too many Benefits)?
At this time, becoming a Benefit Corporation would be a major differentiation factor for design professional firms. Not only are you saying that you practice sustainably, you give back to the community and the like, you are agreeing to publicize how you set and be measured in how you meet goals of social responsibility. Green Building Services, a sustainability consulting firm headquartered in Portland, Oregon is a Certified B-Corporation; according to Principal Richard Manning, AIA “We are all about sustainability and we promote Triple Bottom Line thinking to our clients – that all good decisions should be tested against the effects on the environment, the community and have positive economic impacts. B-Corp certification is a way to show that we are doing that.”
Actually walking the walk can be a strong selling point for an architectural firm to both potential clients and potential employees. The concept of the Benefit Corporation aligns particularly well with the mission of many architects and many architecture firms to enhance the built environment and often the community at large, while not harming the natural environment.
Distinction between a B-Corp and Certified B-Corp
A Benefit Corporation is a creature of state law, and is generally governed by the family of statutes that authorize corporations, including professional corporations. Not all states allow design professional firms to practice in the corporate form, and some firms select other entities such as limited liability vehicles or partnerships in which to operate. For those who cannot or do not wish to become a Benefit Corporation as a matter of law, you can become a Certified B-Corp. The Certification is conferred by the not-for-profit organization B Lab. [3]
As with Benefit Corporations, a Certified B-Corp must demonstrate the broader purposes of social and environmental responsibility, and like legal Benefit Corporations, such businesses are required to publicly disclose their performance in this regard. In order to receive the Certification, the business must achieve a minimum score on an assessment that evaluates the firm’s practices in the areas of governance, workers, community and the environment. In addition to the benefits listed above, B Lab offers Certified B-Corps a portfolio of services and support. [4] Manning of Green Building Services reports, “One of the biggest benefits is that we get to meet owners of other businesses that have similar values as ours. This is a good source of lead and networking for our business. These are the types of business that might be interested in our LEED services or sustainability reporting.”
In conclusion, how can I resist pulling Shakespeare into the conversation? Architects, I encourage you to explore whether becoming a legal or Certified Benefit Corporation would enhance your practice as you ask the age-old question with a new twist, “to B or not to B?”
About the Author
Patti Harris is Founder and CEO of LicenseSure LLC, a business that assists design professional firms with entity formation, licensing and qualifications throughout the 50 states. Prior to founding LicenseSure, Patti spent 13 years as the Managing Partner of a New York City-based construction law firm; in addition to overseeing the business operations of the firm, she advised clients on office and business management issues. Patti is very active in design industry organizations and quite attuned to business issues and challenges faced by design professionals.
Footnotes
[1] http://benefitcorp.net/state-by-state-legislative-status
[2] Although specific benefit corporation varies from state to state, this article relies on the Model Act http://benefitcorp.net/storage/documents/Model_Benefit_Corporation_Legislation.pdf, from which many of the states have derived their specific laws.
[4] http://benefitcorp.net/what-makes-benefit-corp-different/benefit-corp-vs-certified-b-corp
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Photo Credit: Brian Swift
Mark, I am not sure how I feel on this movement. On one hand we as architects are already responsible for the life, safety, health and Welfare of the general public and this would surely embolden the latter; on the other hand I see an opportunity for clients to undermine the profession of architecture again by hiring a B-Corp to fulfill some thinly veiled mission that could use the services of an S-Corp or LLC firm. When I headed up a chapter for the Architecture for Humanity I saw this happen first hand; clients that should have used the local architects services were approaching us to do projects on their “Non Profit” organizations and requesting we do the work for free. This seems to be another fracture in the profession and another burden we put before us to compete with. I do think that it is interesting in your “Today’s Most Popular” that this article is on the top followed by “10 Ways Architects Can Make More Money”, we are becoming more schizophrenic by each generation of architect. I look forward to the others comments.