Daniel Pink had a tweet today to a Washington Post story about Maryland companies signing up to be classified as a “B” corporation in that state. The B for Benefit Corporation will allow for-profit companies to operate to pursue social ideals.

You may ask what is to keep any company from operating in socially responsible ways? Many companies align themselves with causes to burnish their image, after all. It is actually the stockholders which may pose a problem apparently. According to the newspaper:

“These hybrid entities pay taxes and can have shareholders, without the risk of being sued for not maximizing profits. Companies can consider the needs of customers, workers, the community or environment and be well within their legal right.

A benefit corporation, for instance, could choose to buy from local vendors at a higher cost to reduce its carbon footprint, much as the Big Bad Woof does. The company, as a part of the incorporation, is required to file an annual report on contributions to the goals set forth in the charter and submit to an audit by an independent third party. “

This is different from the L3C structure I have mentioned before. Like the L3C, this structure is not recognized by the IRS. Though I am not sure if it is in the same nebulous area the L3C because it doesn’t seem like B companies are meant ever qualify as a program related investment for foundations. Though there is probably a lot about the structure not covered in the news article.

More information about B corporations may be found online at a site created to advance these type of organizations. I didn’t find any discussion about how the IRS views these organizations and if there are significant restrictions to investing. According to the site the need for a B corporation are: (my emphasis)

“B Corporations address two critical problems:

* Current corporate law makes it difficult for businesses to take employee, community, and environmental interests into consideration when making decisions; and
* The lack of transparent standards makes it difficult for all of us to tell the difference between a ‘good company’ and just good marketing.”

This is an effort they are trying to take nationwide so if you are interested, don’t think it isn’t applicable to you just because you don’t live in Maryland. This could be a viable structure for an arts related organization. While the status doesn’t provide any tax breaks, doing well on the required audit can be a positive signal to interested investors.