In a business landscape where profit often takes precedence, there are companies that prioritize more than just financial gains. Today’s business environment values mission as much as financial gain. The Delaware Public Benefit Corporation (PBC) stands out as a unique entity that offers the best opportunity to serve the public good. A PBC is a for-profit company with a legally mandated public benefit goal. Unlike traditional C-Corps or S-Corps, which primarily focus on shareholder returns, a PBC must balance profit with its mission to operate effectively and benefit the public. 

Several US states offer PBC statutes, but PBC laws may differ from state to state. This sets the stage for Delaware’s prominence, allowing it to stand out in the competitive environment of the United States. Coursera, Plum Organics, Veeva, Lemonade, Allbirds, and Kairos Society are some of the most famous PBCs in Delaware. If you are a mission-driven founder, such as an entrepreneur, investor, business leader, or legal advisor interested in impact, this article is for you. It addresses various questions that individuals may have regarding PBCs, including what a public benefit corporation is, its meaning, how a public benefit corporation generates profits, and the process of becoming a public benefit corporation in Delaware. By the end of this article, you will be knowledgeable and prepared to embark on the journey of forming a PBC in Delaware. 

Delaware’s Distinction: Why Choose the First State for Your PBC? 

Delaware is one of the best states to start a Public Benefit Corporation (PBC). It holds an unquestionable position as a leader in corporate law due to its well-established and predictable legal mechanism. The Delaware Court of Chancery plays a crucial role in ensuring a favorable corporate environment in Delaware. Its experience in issues such as corporate governance and conflicts gives businesses a sense of reliability. Incorporating a PBC in Delaware presents numerous benefits to enterprises, making it a perfect location for establishing a Public Benefit Corporation (PBC).

Decoding the Delaware PBC: Purpose, Accountability, and Transparency 

The three pillars of Public Benefit Corporations are Purpose, Accountability, and Transparency. These core principles not only make PBCs a highly effective solution for earning money but also ensure that the public benefit is always at the forefront of their operations. This commitment to accountability and transparency should reassure you of the PBC’s dedication to its mission and the public.

Purpose

Delaware is one of the states that defines public benefit as a beneficial impact or a decrease of a harmful impact on the environment or society in one way or another. This may either be in the form of a general public benefit or a specific public benefit. The general public benefit refers to a broad, positive effect that is taken as a whole and is an inherent part of the company’s overall operations. It can include environmental sustainability, ethical supply chains, fair labour practices, and responsible innovation. On the other hand, the specific public benefit is one or more particular commitments that the PBC mentions in its certificate of incorporation. It may include improving community health, promoting arts and sciences, advancing knowledge, and protecting or restoring the environment.

Accountability

Director duties can shift significantly in a Public Benefit Corporation. They must consider the public benefit purposes alongside financial returns for the business. This enables them to generate revenue while also working for the betterment of society and the environment. The dual duty of a director provides them with legal protection against typical shareholder primacy claims. 

Transparency

Every PBC in Delaware needs to report its progress in the public benefit to its shareholders. Reporting in Delaware is often internal or shareholder-facing. Directors of PBCs in Delaware are required to present a biennial statement to shareholders regarding progress toward achieving public benefits. Although public disclosure of the progress is not mandatory for PBCs, it is a good practice that builds trust and reinforces accountability. 

It is essential to note that a Public Benefit Corporation (PBC) differs significantly from a Certified B Corporation. While a PBC holds a legal status, a Certified B Corporation is a private certification from a third-party organization. Under Delaware law, a company can choose to be a PBC, become a B Corp, or both. 

When to Start a Delaware Public Benefit Corporation: Strategic Timing for Impact 

You must be wondering, what is the best time to start a Delaware Public Benefit Corporation for maximum impact?  

1. New Ventures

If you want to work for a specific mission, it is best to start from day one. You can embed your mission into your PBC from the start to avoid future complications. 

2. Existing Companies

You convert an existing company to a PBC to support your mission. This can emphasize the formal codification of existing values and provide legal protection when raising capital or changing leadership.

3. Attracting Capital

The PBC status of the company appeals to the growing segment of impact investors. It also grabs the attention of those who are focused on ESG (Environmental, Social, Governance). This can potentially unlock new funding sources for the business. 

4. Mission Preservation

Structuring your company as a PBC can be the perfect choice if you want to safeguard its core mission from events like funding rounds, leadership changes, or potential acquisitions. 

Public Benefit Corporation vs. Other Corporate Forms: A Comparative Analysis 

This section is dedicated to the differences between PBCs and other corporate forms.

• Vs. Traditional For-Profit (C-Corp/S-Corp): There are numerous benefits that businesses can gain by using the structure of a Public Benefit Corporation (PBC). It clarifies the mission in terms of law and also strengthens the brand image in the market. In addition, it contributes towards attracting talent to the business and also making it attractive to prospective investors.  However, choosing PBC as your business structure may result in an additional reporting burden and a potential perception of a less pure profit focus (though often misinformed).
• Vs. Non-Profit: While PBCs are for-profit organizations that can distribute earnings to private individuals, non-profit organizations are prohibited from distributing profits to private individuals. Similarly, non-profit organizations are tax-exempt, but PBCs are taxed like any other corporation. 
• Vs. LLC: The LLC form of business is more flexible than the PBCs. PBC offers a professional corporate governance framework, which is distinctly designed to achieve the objective of public benefit. This governance structure may be preferred by confident investors and those with specific growth trajectories. 

The Advantages Beyond Legality: Why Delaware PBCs Win in the Marketplace 

Apart from legal aspects, incorporating a PBC in Delaware offers strategic and market-facing benefits. 

1. Enhanced Brand Reputation

The PBC status for a company signals authenticity and builds trust with consumers and partners who value ethical business practices.

2. Customer Loyalty 

A PBC fosters a deeper connection and loyalty from customers who are socially conscious and formally commit to its benefits. 

3. Talent Attraction & Retention

Mission-aligned individuals, especially the young generations, are drawn to and stay with companies that formally commit to social good.

4. Access to Impact Capital

ESC-focused investors are attracted to the PBC status of a company. This can streamline access to investment and funds from investors.

5. Market Differentiation

Being a PBC helps a company stand out in a competitive market, moving beyond mere marketing claims to a legally backed commitment.

Navigating the Process: Forming or Converting to a Delaware PBC

Starting a PBC involves a set of steps that need to be followed correctly to avoid mistakes. 

• Step 1: The first step is to amend the Certificate of Incorporation to officially designate it as a PBC and state the general and specific public benefits.
• Step 2: The Delaware law requires board and shareholder approval. It is important to note that the conversion of a company may require a supermajority vote.
• Step 3: Entrepreneurs are required to gather the necessary documents, complete the required forms, pay the filing fees, and submit the application to the Delaware Secretary of State.

As this is not a DIY endeavour, it is strongly advised to consult with experienced legal counsel in Delaware corporate law to complete the process accurately and to avoid delays and penalties.

Building a Better Business, One Delaware PBC at a Time

Choosing the Delaware Public Benefit Corporation provides legal protection for the mission, market differentiation, talent attraction, and investor appeal. The growing importance of purpose-driven business models gives rise to PBCs. It is crucial in establishing a more responsible economy and a better world for the people. You may visit the possibility of the PBC in your company, consult with experts, and add a purpose to your business. If you are willing to incorporate your business in Delaware, then IncParadise’s incorporation services can be the best solution for you. You can contact IncParadise if you have any questions or need help setting up a PBC.