To do good while doing well has increasingly become a focus for businesses, reflecting a growing recognition of the desire of consumers, investors, and managers to tackle environmental and social problems. Startup founders may be familiar with buzzwords such as “B Corp” and “ESG” but are often unsure how to structure their organization to achieve their goals.
When it comes to choosing the right structure for an enterprise with a social mission, founders have several options, illustrated in the chart, and further described, below. In this article, we have focused on entities available under Delaware law. Delaware public benefit corporations (PBCs) emerged in 2013 and have become especially popular as a result of the increased demand for socially conscious business practices, combined with the familiar reliability of Delaware corporate law. Of all the entity types available, the PBC is often the best fit for social entrepreneurs of high-growth startups with a social mission, who plan to seek venture capital or institutional impact funding. Unlike traditional corporations, which by law must focus on the financial gain of shareholders to the exclusion of other concerns, PBCs are permitted to pursue a dual mission: delivering returns to shareholders while advancing social or environmental objectives. This represents a subtle but basic shift in long-standing legal principles that have underpinned the way companies behave. Below we outline key distinctions among PBCs, traditional corporations, LLCs and nonprofits.
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