Legal Definitions - public benefit corporation

A public benefit corporation is a type of business entity designed not only to generate profit but also to create a positive impact on society or the environment. Unlike traditional corporations that primarily focus on maximizing financial returns for shareholders, a public benefit corporation is legally obligated to consider the interests of all stakeholders—including employees, customers, the community, and the environment—alongside its financial goals.

There are two main categories of public benefit corporations:

• Governmental Public Benefit Corporations: These are entities established by a government to provide essential services or benefits to the public, often at no cost or a subsidized rate. Their primary purpose is to serve the common good rather than to generate revenue.
  • Example 1: A State-Run Affordable Housing Development Agency
    

    Imagine a state government establishes an agency specifically tasked with developing and managing affordable housing units for low-income families across the state. This agency operates with public funds and aims to address housing insecurity, not to make a profit. Its success is measured by the number of families housed and the quality of the living conditions it provides.

    This illustrates a governmental public benefit corporation because it is created by the government to provide a direct social good (affordable housing) to its citizens, operating without the primary goal of financial profit.

• Private Public Benefit Corporations (PBCs or Benefit Corporations): These are for-profit companies that legally commit to pursuing a specific public benefit alongside their financial objectives. They are often referred to as PBCs or Benefit Corporations, and some may also be certified as B Corps by a third-party organization, signifying they meet rigorous standards of social and environmental performance, accountability, and transparency. Their founding documents explicitly state their public benefit purpose, and they are typically required to report on their progress toward achieving it.
  • Example 2: A Sustainable Food Delivery Service
    

    Consider a food delivery company that explicitly states in its corporate charter that, in addition to delivering meals, it is committed to reducing food waste and supporting local, organic farms. The company might achieve this by partnering exclusively with farms that use sustainable practices, donating unsold food to shelters, and using only electric vehicles for delivery, even if these choices lead to higher operational costs than a competitor focused solely on speed and lowest price.

    This demonstrates a private public benefit corporation because it is a for-profit business that has legally committed to a specific public benefit (environmental sustainability and support for local agriculture) alongside its financial goals, balancing profit with its social mission.

  • Example 3: An Educational Technology Company for Underserved Communities
    

    Picture a software company that develops educational apps and platforms. While it sells its products, its corporate charter mandates that a significant portion of its profits must be reinvested into creating free educational tools for schools in low-income areas and providing subsidized access to its premium features for students from disadvantaged backgrounds. The company regularly publishes reports detailing its impact on educational equity.

    This is an example of a private public benefit corporation because it is a for-profit entity that has legally embedded a social mission (advancing educational equity) into its core operations, requiring it to consider the societal impact of its decisions alongside its financial performance.