Now Available – B Corporations in Arizona

Welcome to Arizona! by Fred Miller from Flickr (Creative Commons License)

Welcome to Arizona! by Fred Miller from Flickr (Creative Commons License)

One of the awesome developments in the Arizona business community for 2015 is that businesses are allowed to form benefit corporations (B corporations) in this state. These are for-profit corporations that have other motives for being in business besides maximizing profits, and their shareholders are aware and accept that the company has dual motives. This motive must be to at least provide a “general public benefit,” meaning the business has a “material positive impact on society and the environment, taken as a whole, as assessed against a third-party standard, from the business and operations of a benefit corporation.” This option became available in Arizona at the beginning of the year.

Given that this is a new type of business entity in this state, I looked to the Arizona Corporation Commission (ACC) to get answers to my questions about B corporations.

What information does a company have to provide to the ACC in the Articles of Incorporation?
To create a B corporation, the incorporators must fill out the same Articles of Incorporation as other corporations in Arizona and pay a $60 filing fee ($95 for expedited processing). Every corporation is required to file an annual report with the ACC. B corporations must file an annual report and an annual benefit report where the company describes what general public benefit it provided. Each report has a separate filing fee.

Can an existing Arizona corporation be converted to a B Corporation? If so, how? Please include information about the associated fee(s).
Yes. An existing Arizona corporation can be converted to a B corporation by filing an Articles of Amendment with the ACC and paying a $25 filing fee ($60 for expedited processing). An Arizona LLC can also be converted into a B corporation under the Arizona Entity Restructuring Act.

Is a B corporation taxed like a C corporation? If so, can a company be a B corporation and file as an S corporation with the IRS?
Traditional corporations are C corporations, and they have double taxation where the corporation pays taxes on its income and the shareholders pay taxes. If the company qualifies, it may elect to be taxed as an S corporation where there is pass-through taxation so only the shareholders pay taxes on the income. Based on my research, a B corporation is taxed as a C corporation, but it has the option, if it qualifies, to be taxed as an S corporation.

I tell all clients to talk to their accountant before starting their business to determine which type of business entity is right for them and to make sure they understand the tax implications. And yes, every business needs an accountant.

Where can people go for more information about B corporations in Arizona?
The ACC created a legislative update that is filled with information and links about B corporations in Arizona. This is a great resource if you’re interested in starting a B corporation or converting your business to a B corporation. If you still have questions after reading this, contact the ACC or a business attorney in your community.

If you’re interested in B corporations but are unsure you want to create or convert your business to one at this time, you can look into being “B Corp. Certified” by B Lab.

If you want to chat with me about this topic, feel free to connect with me on TwitterFacebookYouTubeLinkedIn, or you can email me.

Please visit my homepage for more information about Carter Law Firm.

Coming to Arizona in 2015: B Corporations

voting or shopping by photologue_np from Flickr (Creative Commons License)

voting or shopping by photologue_np from Flickr (Creative Commons License)

An exciting bill was approved by the Arizona legislature this year that will allow people to create B corporations in Arizona starting in 2015. (Apparently it will take them until then to update the Arizona Corporation Commission website with the forms and information.)

Benefit corporations, or B corporations, are like other businesses except that they have “higher standards of corporate purpose, accountability, and transparency.” In other corporations, the people in charge have an obligation to make the most money for their shareholders, and if the shareholders believe that management isn’t doing that, they can sue the company. In a B corporation, the company has other motives for being in business besides maximizing profits and the shareholders are on board with that plan. These are companies like Patagonia and Ben & Jerry’s.

B Corp CertifiedEarlier this year, I attended a seminar organized by the Arizona Tech Council on B corporations where we learned about some of the benefits of having B corporations in your community. B corporations are 60% more likely to donate at least 10% of their profits to charity compared to other sustainable businesses and they are 18% more likely to use suppliers from low income communities compared to other sustainable businesses. These companies are four times more likely to give employees paid professional development opportunities compared to other sustainable businesses. In 2011, 95% of B Corps paid a living wage to all employees and were three times as likely to offer health insurance to all employees and have retirement plans.

Until we have B corporations in Arizona, companies can become B-corp certified if they meet the B Lab’s “rigorous standards of social and environmental performance, accountability, and transparency.” There are at least four B-corp certified businesses in Arizona, including Goodmans Interior Structures and DIRTT Environmental Services. A business doesn’t have to have a higher social cause as its obvious purpose for being in business. Many small businesses who provide traditional goods and services can be B-corp certified.

Over 600 companies have become or B-corp certified. If you want to learn more about B corporations including how to become B-corp certified, please visit their website. If you need help deciding whether you should become a B corporation or B-corp certified, contact your accountant or business attorney for assistance.

You can connect with me on TwitterGoogle+FacebookYouTubeLinkedIn, or you can email me.
You can also subscribe to the Carter Law Firm newsletter.
Please visit my homepage for more information about Carter Law Firm.