Know the Difference: B Corp vs. Nonprofit
Wednesday, April 29, 2020
As charitable drives take place all over the country and discussions of corporate responsibility preside over our news media, you may frequently hear about nonprofit organizations and benefit corporations (also called b corps) organizations. While both share a commitment to a better world, there can be substantial differences between the two, and they’re important to know as you consider where your money goes, what sort of employment you might want, and even what organizations to prop up in your own community. If you’re wondering how exactly they’re different or similar, read on!
All about ownership
In a nonprofit, there are no owners or shareholders, while a B corp has shareholders. While a nonprofit works toward a public good without the intent of turning a profit, a B corp is a traditional company in that shareholders expect a return. Even if a nonprofit and B corp are working toward similar public goals, the aim of the company is different. Nonprofits must devote 100% of their resources to achieving the work of their mission, while B corps have more freedom.
Of course, when nonprofits need dollars, they can write grant proposals or hold fundraisers. B corps can sell stock or acquire debt, just like other corporations. Nonprofits are governed by a board, and corporations, B corp or not, answer to shareholders, directors, and officers.
The confusion between the two types of organizations happens because, like nonprofits, B corps have undergone lengthy evaluations to prove their commitment to ensuring a better world, and often donate money to nonprofits, though they get to choose when and how much.
Nonprofits don’t have to report progress to members, but most of them do because it can help raise money from donors. B corps, and all other corporations, must report to shareholders. Because they are B corps, they must also update shareholders on progress toward the benefit purpose they have outlined. Neither must share the report publically.
When you’re thinking about companies that do good, it can be easy to assume their designation. Method soap, for example, is in the news a lot for good work, but their goal is to sell soap. They’re a B corp. St. Jude Children's Research Hospital is also frequently in the media, but, although they exchange a lot of money, they’re a nonprofit. Typically, you can ask yourself if someone is trying to profit, and, if it gets confusing, a quick Google search can clear things up. B corps and nonprofits are both doing great work and should be applauded for the extra care they take to support their communities!