What Is a Public Benefit Corporation (PBC)?

A Public Benefit Corporation (PBC) is a for-profit corporate structure that legally binds a company to balance financial returns with a social or environmental mission. Unlike a non-profit, a PBC is owned by shareholders who expect a profit. This state-level framework integrates a commitment to a public good into the company’s formation documents, allowing it to operate responsibly while pursuing a stated benefit.

A PBC should not be confused with a B Corp. While a PBC is a legal entity recognized by the state, a B Corp is a certification from the non-profit B Lab. A company can be a PBC, a B Corp, or both.

The Dual Purpose Mandate

A PBC operates under a dual mandate that alters the traditional corporate focus on maximizing shareholder value. The corporation’s leadership must balance the financial interests of its owners with the interests of other stakeholders, such as employees, customers, and the community. This structure allows the company to prioritize long-term, sustainable value for a wider range of groups affected by its operations.

The legal definition of a “public benefit” is broad and can include charitable, cultural, economic, educational, or environmental activities. For example, a PBC might commit to reducing its carbon footprint, donating a percentage of profits, or implementing fair labor practices. The specific benefit must be clearly articulated in the company’s formation documents, making it a legally enforceable part of the corporation’s purpose.

The dual-purpose framework provides legal protection for the corporation’s directors and officers. In a traditional corporation, directors could face a lawsuit from shareholders for making a decision that prioritizes a social good over immediate profits. The PBC structure modifies this fiduciary duty, requiring directors to consider the impact of their decisions on the stated public benefit, which protects them from such legal risk.

Required Information for PBC Formation

To establish a PBC, founders must prepare the Articles of Incorporation, which serves as the corporation’s charter. Most states provide a standard form for this document, often available on the Secretary of State’s website. This form requires specific information to register the entity.

The corporate name must signal the company’s status. Many jurisdictions require the legal name to include “Public Benefit Corporation” or an abbreviation like “P.B.C.” or “PBC.” Founders should verify their state’s specific naming conventions to avoid having their filing rejected.

A “specific public benefit statement” must be included in the Articles of Incorporation. This formal declaration describes the positive impact the corporation intends to create and cannot be vague. Examples include “providing literacy programs for underserved youth” or “developing products from 100% recycled materials.” This statement becomes part of the public record and sets the standard for measuring the company’s performance.

Founders must identify a registered agent and the initial board of directors. A registered agent is an individual or entity designated to receive official legal and government correspondence and must have a physical street address. The names and addresses of the initial directors who will govern the corporation must also be listed in the Articles of Incorporation.

The Formation and Conversion Process

To form a new PBC, founders submit the completed Articles of Incorporation to the appropriate state agency, such as the Secretary of State. This filing can be done online or by mail. A filing fee, ranging from approximately $70 to over $200, must be paid at the time of submission.

An existing corporation can become a PBC through a conversion process by amending its Articles of Incorporation. The board of directors must first approve a resolution to adopt PBC status and add the public benefit statement. The amendment must then be put to a shareholder vote, with requirements varying by state; for example, some states require a two-thirds supermajority while others require a simple majority.

After shareholder approval, the corporation files an Articles of Amendment with the state, including the new PBC language and public benefit statement. For either a new formation or a conversion, the state agency will return a confirmation document, such as a certified copy of the articles. This document serves as official proof of the entity’s legal status as a PBC.

Ongoing Compliance and Tax Status

A PBC has ongoing obligations to maintain its status, the main one being the publication of an annual benefit report. This report must be delivered to shareholders and is often made public on the company’s website. The report assesses the company’s performance in achieving its stated public benefit.

Many state laws require PBCs to measure their performance against a credible, independent third-party standard to ensure objectivity. Using an established framework provides a transparent way to demonstrate progress to stakeholders. This assessment is a component of the annual benefit report, detailing the corporation’s successes and challenges in fulfilling its mission.

The “Public Benefit Corporation” designation is a state-level legal status, not a federal tax classification, and a PBC is taxed like a traditional corporation. By default, the Internal Revenue Service (IRS) taxes a PBC as a C Corporation. This requires the corporation to pay income taxes on its profits and file Form 1120, U.S. Corporation Income Tax Return.

A PBC that meets certain criteria can elect a different tax treatment. If the corporation has no more than 100 shareholders and only one class of stock, it can file Form 2553 with the IRS to be taxed as an S Corporation. Under S Corp status, profits and losses are passed through to the shareholders’ personal income, avoiding corporate-level taxation.