Beyond Profit: Why Your Next Delaware Company Should be a Public Benefit Corporation (PBC)
Contents
- Why Form a Public Benefit Corporation?
- What Is a Public Benefit Corporation?
- The Key Advantage of a Public Benefit Corporation: Directors Gain Legal Protection
- Why Gen Z and Millennial Founders Are Forming Public Benefit Corporations
- Delaware is Leading the Way with Public Benefit Corporations
- PBC vs. Certified B Corp: What’s the Difference?
- Are Investors Comfortable with Public Benefit Corporations?
- Is a Delaware Public Benefit Corporation Right for Your Startup?
- The Future of Business is Purpose Driven
American businesses were historically built on maximizing shareholder value above all else. But modern entrepreneurs, including Millennials and Gen Z, want to build businesses structured like the Public Benefit Corporation that create profits and positively impact their communities and the environment. In addition to growing their company, modern entrepreneurs are focused on sustainability, transparency, employee well-being, and social responsibility using their business.
The most desirable customer demographics are rising Millennials and Gen Z. The stakeholder before shareholder mindset is common progressive customers, employees, and investors. New business owners are beginning to choose Public Benefit Corporations at a higher rate to keep up with the overall cultural shift of this new generation.
As the first and only Certified B Corporation among incorporation services, IncNow has seen firsthand how aligned founders are rethinking what success looks like to understand that purpose-driven companies represent the future of entrepreneurship.
Why Form a Public Benefit Corporation?
A Public Benefit Corporation (PBC) allows a business to work toward profit while supporting a social or environmental mission. Unlike a general corporation, a PBC allows directors to consider the affects their decisions have on employees, customers, communities, and the environment, not just shareholders.
By incorporating its public support and purpose into its legal framework, a PBC helps protect the company’s mission as it expands, draws in investors who share its vision, and builds trust with customers, partners, and surrounding community.
What Is a Public Benefit Corporation?
A PBC is a specific type of Delaware corporate structure which enables for profit companies to generate revenue for profit with a mission locked public interest in mind. This special type of corporation is legally structured to balance shareholder interests, materially affected individuals through the company’s interactions, and specific public wellbeing.
These public benefits include but are not limited to:
- Environmental sustainability
- Ethical supply chains
- Community development
- Educational access
- Employee wellness
- Diversity and inclusion
- Scientific innovation
- Social impact initiatives
Overall, PBCs give founders the ability to form a mission driven company without constantly worrying about the potential conflicting interests of shareholder expectations.
The Key Advantage of a Public Benefit Corporation: Directors Gain Legal Protection
A Delaware Public Benefit Corporation enables decisions that balance profits with broader social goals. These specific actions include choosing environmentally sustainable local suppliers that may even cost a bit more, providing generous benefits to employees, rejecting lucrative but ethically questionable partnerships, and prioritizing long-term community impact over short-term revenue.
In contrast, a standard corporation would risk shareholder lawsuits if this were to cause any waste of corporate assets to compromise profits. Shareholders may argue that these decisions reduce shareholder value and should not be initiated. The long view is that such ethical choices create more long-term value with reputational improvement.
Under Delaware law, PBC directors are allowed to balance the entity’s financial interests with their stated public benefit mission. This enables leadership teams to think long-term instead of obsessing over quarterly numbers, creating room for sustainable growth strategies.
Why Gen Z and Millennial Founders Are Forming Public Benefit Corporations
Modern entrepreneurs are choosing PBCs because of the environment they are growing up in. Gen Z and Millennials have experience climate concerns, economic instability, social accountability, and rapidly changing consumer expectations. As a result, modern founders ask new, revolutionary questions while forming corporations.
These questions focus more on how their company can create a meaningful impact on society. How they can scale their company without compromising their core values. Will their customers trust companies that only care about profit? How do they build businesses that employees are proud of and enjoy working for?
These questions are directly answered by the Public Benefit Corporation model. Through this model, many founders can blend their personal mission statement into the structure and skeleton of the company itself. A PBC ends up helping preserve the founder’s initial intent as the business grows. It also helps recruit and retain great employees and partners.
Delaware is Leading the Way with Public Benefit Corporations
Many mission-driven startups choose Delaware to form their corporations because of its predictable corporate law, business-friendly legal system, flexible governance structures, well-established Court of Chancery, and strong investor familiarity. Due to these reasons, Delaware is the gold standard for corporate formation in the United States alongside being one of the most respected jurisdictions for Public Benefit Corporations.
Under Delaware law, PBCs are given clear guidance on how they operate, making it easier for founders and investors alike to understand their rights and responsibilities. In Delaware, a PBC is not accountable to anyone other than its shareholders for reporting on its public benefit mission.
PBC vs. Certified B Corp: What’s the Difference?
A Public Benefit Corporation is a legal business structure formed under state law. In contrast, a Certified B Corp is a private certification awarded by the nonprofit B Lab to companies that meet certain social and environmental performance standards.
A corporation can be filed as a PBC without ever seeking B Corp certification, and a Certified B Corp certification can be achieved without being a PBC. However, many mission-driven companies choose to become PBCs with a Certified B Corps certification due to the strong legal accountability and operational standards offered to the entity.
At IncNow, we became a Certified B Corporation after 43 years in business to reflect our core belief that businesses should help the community alongside the bottom line. We believe that entrepreneurship can effectively balance profits and responsibility together for the world around us, and Delaware’s PBC framework helps make that possible.
Are Investors Comfortable with Public Benefit Corporations?
Yes, impact investing has grown substantially over the last decade leading to many venture capital firms concurrently seeking companies with strong environmental, social, and governance commitments. Moreover, some investors see a PBC company as a positive sign that demonstrates long-term thinking, strong governance, brand authenticity, mission clarity, and reduced reputational risk. For many modern consumers and investors, ethical business practices are the new modern expectation for startups and other corporations.
Is a Delaware Public Benefit Corporation Right for Your Startup?
Delaware Public Benefit Corporations are often a perfect fit for anyone who:
- Wants to build a mission-driven company
- Protect their long-term vision
- Prioritize sustainability and social impact
- Appeal to socially conscious consumers, and
- Create a legally backed connection between profit and purpose.
These PBC structures are not necessary for every business, but it provides a powerful foundation for founders who believe businesses should be used for positive change in the community.
The PBC by default is taxed as a C-corporation. It can also elect the taxed as an S-corporation. The B-corp is not a tax election with the IRS and is not tax exempt like a 501(c)(3), Non-profit, Non-stock corporation. You can also form a Public Benefit LLC in Delaware.
The Future of Business is Purpose Driven
In the modern era, profit is no longer the only measure of success for companies. The next generation of successful companies will be judged by how they treat employees and the environment around them. This new community-centric generation allows Delaware Public Benefit Corporations to give founders a way to build new companies that reflect their new reality. The future of business is here, and its purpose driven culture is the main driver in building something that matters.