What’s a Pennsylvania Benefit Corporation?

A Benefit Corporation – also known as a B Corporation – is a new business model that has emerged out of a growing interest in promoting socially responsible businesses.  The B Corporation represents an attempt by several states to promote socially-responsible businesses create transparency for companies claiming to have a positive public impact. This has wide-ranging implications for a variety of issues in Philadelphia, including charitable planning and community involvement.

The Pennsylvania Benefit Corporation Act, passed in 2012, creates a new business entity that incorporates a socially-beneficial mission, in addition to returning a profit to investors.  This mission – or public benefit – must have a materially positive impact on society and the environment – for example, providing goods or services to underserved communities, preserving the environment, or improving human health.

The Act requires the corporation’s officers and directors to consider the impact of the company’s actions on various private and public stakeholders.  Shareholders of the company can bring an enforcement action called a “benefit enforcement proceeding” for failing to comply with this requirement.  Unlike traditional shareholder actions, however, only injunctive relief may be ordered; money damages are not available.

A B Corporation must designate a “benefit director,” who must prepare a report each year on the company’s progress in accomplishing its public benefit mission.  The report must be filed with the Pennsylvania Department of State and made available to the public.  Additionally, a B Corporation must submit to an annual evaluation by an independent third party.

Philadelphia was the first city in the nation to provide a tax incentive to certified B Corporations, which are eligible to receive up to $4,000 in tax credits towards the city’s Business Income and Receipts Act.  No tax incentives are available for B Corporations at the state or federal level, however such companies may benefit from customer awareness and investors seeking to invest in socially-responsible businesses.

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