This article originally appeared at https://entrearchitect.com/2014/11/09/benefit-corporations-for-architects/. Thank you to Mark Lepage for the opportunity, and the support and coaching you provide to small architecture firms.
Recently, I have been chatting with numerous members of the design community about Benefit Corporations (or B-Corps) and have been met with an equal number of blank stares. The Benefit Corporation movement is gaining momentum daily; 26 states plus the District of Columbia will have legislation authorizing B-Corps by the end of 2014, while 12 additional states have legislation pending.i
The Benefit Corporation is considered a hybrid of a for-profit corporation and a not-for-profit in that the directors do not run the corporation solely to maximize corporate value for its shareholders. Rather, a Benefit Corporation commits to taking on social and environmental responsibilities in addition to its primary business purpose.
The B-Corp adopts in its articles of incorporation a commitment to socially or environmentally beneficial practices, usually by committing to operate for general public benefit and it may also adopt specific beneficial purposes such as preserving the environment or improving human health.ii
It is the role of directors that most distinguishes B-Corps from other for-profit corporations. Directors are accountable for fulfilling the social and environmental purposes of the B-Corp. Legally, the obligations of the directors are broadened from the single duty of maximizing shareholder value to decision-making that considers a multitude of other stakeholders, which may include the firm’s employees, its customers, the community and the environment.
Transparency and accountability are also features of the Benefit Corporation model. B-Corps are typically required to publish annual reports assessing their social and environmental impact on their websites and, in some cases, file such reports with the state in which they are incorporated. This impact must be measured by an independent third-party standard,e.g., B Lab, Global Reporting Initiative (GRI), GreenSeal to name a few.
At this time, becoming a Benefit Corporation would be a major differentiation factor for design professional firms. Not only are you saying that you practice sustainably, you give back to the community and the like, you are agreeing to publicize how you set and be measured in how you meet goals of social responsibility. Green Building Services, a sustainability consulting firm headquartered in Portland, Oregon is a Certified B-Corporation; according to Principal Richard Manning, AIA “We are all about sustainability and we promote Triple Bottom Line thinking to our clients - that all good decisions should be tested against the effects on the environment, the community and have positive economic impacts. B-Corp certification is a way to show that we are doing that.”
Actually walking the walk can be a strong selling point for an architectural firm to both potential clients and potential employees. The concept of the Benefit Corporation aligns particularly well with the mission of many architects and many architecture firms to enhance the built environment and often the community at large, while not harming the natural environment.
A Benefit Corporation is a creature of state law, and is generally governed by the family of statutes that authorize corporations, including professional corporations. Not all states allow design professional firms to practice in the corporate form, and some firms select other entities such as limited liability vehicles or partnerships in which to operate. For those who cannot or do not wish to become a Benefit Corporation as a matter of law, you can become a Certified B-Corp. The Certification is conferred by the not-for-profit organization B Lab.iii
As with Benefit Corporations, a Certified B-Corp must demonstrate the broader purposes of social and environmental responsibility, and like legal Benefit Corporations, such businesses are required to publicly disclose their performance in this regard. In order to receive the Certification, the business must achieve a minimum score on an assessment that evaluates the firm’s practices in the areas of governance,workers, community and the environment. In addition to the benefits listed above, B Lab offers Certified B-Corps a portfolio of services and support.iv Manning of Green Building Services reports, “One of the biggest benefits is that we get to meet owners of other businesses that have similar values as ours. This is a good source of lead and networking for our business. These are the types of business that might be interested in our LEED services or sustainability reporting.”
In conclusion, how can I resist pulling Shakespeare into the conversation? Architects, I encourage you to explore whether becoming a legal or Certified Benefit Corporation would enhance your practice as you ask the age-old question with a new twist, “to B or not to B?”
Although specific benefit corporation varies from state to state, this article relies on the Model Act http://benefitcorp.net/storage/documents/Model_Benefit_Corporation_Legislation.pdf, from which many of the states have derived their specific laws.↩
Design professionals all over the world have taken to heart the words famously crooned by Frank Sinatra, "I want to be a part of it, New York, New York."
Starting a business and forming an entity are two different things.
A gratifying part of my business is helping design professionals start their own practices. I usually have a gut feeling about who is going to make it, and who may decide that being an employee wasn’t so bad after all.
I am seeing a lot of action on the Design Professional Service Corporation (DPC) front. The DPC is the only entity in which New York permits non-licensed owners of architecture, engineering and other design professional firms.
Architects and their practices are highly regulated because of their charge to safeguard life, health, property and the public welfare.
Many of my clients and potential clients are in the process of setting up their own design firms.
Starting an architectural firm is a big decision. One of the next big decisions for the architectural entrepreneur is deciding what form of business entity will be appropriate for your current practice as well as your future practice.
When a client comes to us to form a New York business, the first step we take is to evaluate the proposed name of the entity.