What is a Delaware Public Benefit Corporation?

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Public Benefit Corporations are formed to pursue a business purpose (often embodied in a generalized statement) but also one or more express public benefits the corporation intends to pursue alongside its for-profit business. In operating the Public Benefit Corporation and setting its direction, the Board of Directors may balance its fiduciary duty to act in the best interests of the corporation and shareholders with the interests of other constituencies affected by the corporation’s activities, such as, among other possibilities, its employees, current and retired, the environment, the towns and regions in which it operates, and society as a whole.

Corporations vs. Public Benefit Corporation

At a glance, Delaware Public Benefit Corporations have quite a few similarities to traditional C-Corps. Both entities aim to make a profit, have a responsibility to their shareholders, and have similar corporate structures. However, Public Benefit Corporations also serve broader interests for the benefit of society, the environment, the natural world and/or the world at large. In this way, they reflect a very different conception of the corporate form than the “shareholder primacy” model, which is focused solely on shareholder economic benefit work.

How to Form a Public Benefit Corporation

A Delaware Public Benefit Corporation can be formed in the same manner as a Delaware Corporation, by filing a Certificate of Incorporation with the Delaware Division of Corporations. The Certificate of Incorporation for a Delaware Public Benefit Corporation must be clearly marked to delineate it as such.

The Certificate of Incorporation must also list the public benefit(s) the corporation will pursue. The State of Delaware has the ability to reject a Certificate of Incorporation if the public benefit statement is improper or impermissibly stated. Public benefits should be specific enough to identify the cause sufficiently, but should be general enough in scope to permit future growth in tackling the public issue.

For instance, a public benefit stating that a public benefit corporation will seek to “ensure that schoolchildren in grades 3 through 5 in X school district have sufficient access to organic fruits and vegetables in school lunches” may be too specific, particularly in geographic scope and age. The benefit could be restated as: “ensuring the schoolchildren in X counties, and eventually Y state as a whole, have sufficient access to nutritious school lunches.”

Likewise, a Delaware Public Benefit Corporation’s stock certificates must also be clearly marked with the words “Public Benefit Corporation.” or, in the case of uncertificated shares, the text provided to the shareholder in connection with such shares must bear the Public Benefit Corporation designation. However, in every other manner, the structure of a Delaware Public Benefit Corporation mirrors the structure of any type of Delaware Corporation.

You can learn more about how to form a Public Benefit Corporation on our website

Do the Owners of a Public Benefit Corporation Have Any Liability?

Similar to other types of corporations, owners of Public Benefit Corporations generally have limited liability. This means that the shareholders' personal assets are protected from any debts and liabilities that the Public Benefit Corporation may face.

What Is the Difference Between a B Corporation and a Public Benefit Corporation?

Is a Public Benefit Corporation a Nonprofit?

No. Public Benefit Corproations and Non-Profit Corporations are two different types of business entities, each with a distinct legal structure and a unique purpose. A Public Benefit Corporation is a for-profit corporation that is organized to pursue both financial profit and a specific public benefit. On the other hand, a non-profit organization is structured for the purposes other than making a profit.

Are Public Benefit Corporations Tax-Exempt?

No, Public Benefit Corporations are not tax-exempt. Since PBCs are still for-profit businesses, they still operate like regular corporations and will need to pay taxes on their profits just like any other C-Corp or S-Corp. If you'd like to form a tax-exempt entity, consider forming a nonprofit organization instead.

What Is the Difference Between a B Corporation and a Public Benefit Corporation?

Where a Public Benefit Corporation is a recognized legal entity that focuses on enriching some aspect of society, a B Corporation is not a legal entity or a specific type of corporate structure. A B Corp is a type of for-profit company that has been certified by B Lab, a non-profit that evaluates other brands based on their social and environmental impact. Any type of entity can become a B Corp. You can read more about What is Certified B Corporation? on our website.

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Recorded on: January 27, 2021

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