What is a Delaware Public Benefit Corporation?
Form a Public Benefit Corporation Now
Modern business owners are increasingly looking for ways to build companies that reflect more than financial goals alone. For some entrepreneurs, long-term success means earning revenue and supporting a broader mission at the same time. A Delaware public benefit corporation offers one path for aligning business strategy with purpose, giving founders a structure designed for companies that want profit and impact to work together.
What is a Public Benefit Corporation?
A public benefit corporation, or PBC, is a for-profit corporation formed to pursue both financial success and a stated public benefit. Unlike a traditional corporation, which is generally focused on maximizing value for its shareholders, a PBC is designed to balance shareholder interests with the company’s public purpose.
A PBC can sell products or services, earn profits, issue stock, and operate like other corporations. What makes it different is that its mission is built into its legal structure. The company must identify one or more public benefits, such as environmental sustainability, education, healthcare access, charitable support, or community development.
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Why Form a PBC?
Business owners who form public benefit corporations often want their company’s mission to be part of its legal foundation. A structure that pursues profit and a specific purpose may appeal to founders who want to attract mission-aligned investors and protect the company’s purpose as it grows. Let’s compare public benefit corporations to a few other popular types of Delaware entities:
- PBC vs. traditional corporation - A general corporation is usually structured to prioritize shareholder value. A PBC is also a for-profit corporation, but it is designed to balance shareholder interests with its stated public benefit.
- PBC vs. nonprofit - A nonprofit corporation is typically formed for charitable purposes and does not have private owners in the same way a corporation does. A PBC, by contrast, can earn profits, issue stock, have shareholders, and distribute returns while still pursuing a public benefit.
- PBC vs. B Corp - A PBC is a legal business entity, while B Corp certification is a third-party certification for companies that meet certain social and environmental standards. A company can be a PBC without being B Corp certified, and a B Corp certified company does not necessarily have to be a PBC.
- PBC vs. ²ÊºçƵµÀ - A Delaware ²ÊºçƵµÀ is flexible and can be used for many types of companies, including mission-driven ones. A PBC has a public benefit purpose built into its corporate structure and may be more familiar to investors who prefer stock-based corporate ownership.
Public Benefit Corporation Ownership
A Delaware public benefit corporation is owned by its shareholders. Ownership is typically represented by shares of stock, which may be held by founders, investors, employees, or other shareholders. Like a traditional corporation, a PBC can issue different classes of stock, allowing the company to structure voting rights, economic rights, and investor preferences in different ways. This stock-based ownership model can make a Delaware PBC appealing to businesses that plan to raise capital, offer equity compensation, or bring in additional owners as the company grows. Although the company pursues a public benefit, it remains a for-profit entity owned by its shareholders.
Public Benefit Corporation Liability
A Delaware public benefit corporation generally provides limited liability protection for its shareholders. This means shareholders are usually not personally responsible for the company’s debts or other legal obligations simply because they own stock in the business. Instead, liability typically belongs to the corporation itself. As with any corporation, owners should keep business and personal finances separate and properly maintain the company to help preserve this protection. While a PBC has a mission-driven purpose, it is still a separate legal entity that can own property, incur debts, and face legal claims in its own name.
How to Form a Public Benefit Corporation
A Delaware Public Benefit Corporation can be formed in the same manner as a Delaware Corporation, by filing a Certificate of Incorporation with the Delaware Division of Corporations. The Certificate of Incorporation for a Delaware Public Benefit Corporation must be clearly marked to delineate it as such.
The Certificate of Incorporation must also list the public benefit(s) the corporation will pursue. The State of Delaware has the ability to reject a Certificate of Incorporation if the public benefit statement is improper or impermissibly stated. Public benefits should be specific enough to identify the cause sufficiently, but should be general enough in scope to permit future growth in tackling the public issue.
For instance, a public benefit stating that a public benefit corporation will seek to “ensure that schoolchildren in grades 3 through 5 in X school district have sufficient access to organic fruits and vegetables in school lunches” may be too specific, particularly in geographic scope and age. The benefit could be restated as: “ensuring the schoolchildren in X counties, and eventually Y state as a whole, have sufficient access to nutritious school lunches.”
Likewise, a Delaware Public Benefit Corporation’s stock certificates must also be clearly marked with the words “Public Benefit Corporation,” or, in the case of uncertificated shares, the text provided to the shareholder in connection with such shares must bear the Public Benefit Corporation designation. However, in every other manner, the structure of a Delaware Public Benefit Corporation mirrors the structure of any type of Delaware Corporation.
You can learn more about how to form a Public Benefit Corporation on our website.
Public Benefit Corporation FAQs
Do the Owners of a Public Benefit Corporation Have Any Liability?
Similar to other types of corporations, owners of Public Benefit Corporations generally have limited liability. This means that the shareholders' personal assets are protected from any debts and liabilities that the Public Benefit Corporation may face.
Is a Public Benefit Corporation a Nonprofit?
No. Public Benefit Corporations and Non-Profit Corporations are two different types of business entities, each with a distinct legal structure and a unique purpose. A Public Benefit Corporation is a for-profit corporation that is organized to pursue both financial profit and a specific public benefit. On the other hand, a non-profit organization is structured for purposes other than making a profit.
Are Public Benefit Corporations Tax-Exempt?
No, Public Benefit Corporations are not tax-exempt. Since PBCs are still for-profit businesses, they still operate like regular corporations and will need to pay taxes on their profits just like any other C-Corp or S-Corp. If you'd like to form a tax-exempt entity, consider forming a nonprofit organization instead.
What Is the Difference Between a B Corporation and a Public Benefit Corporation?
Where a Public Benefit Corporation is a recognized legal entity that focuses on enriching some aspect of society, a B Corporation is not a legal entity or a specific type of corporate structure. A B Corp is a type of for-profit company that has been certified by B Lab, a non-profit that evaluates other brands based on their social and environmental impact. Any type of entity can become a B Corp. You can read more about B Corps in our blog, What is a Certified B Corporation?
Form a Public Benefit Corporation Today
Ready to form a Delaware public benefit corporation? Start building a company that supports both your business goals and your broader mission. Our team at Harvard Business Services, Inc., can help you prepare and file the documents needed to create your PBC with confidence.
You can also learn more about PBCs on our website:
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