---
title: "Public Benefit Corps: The For-Profit/Nonprofit Hybrid"
description: Learn why structuring your mission-focused business as a Benefit Corporation can attract investors and solidify your commitment to social or environmental goals.
---

[Blog | Startup Law Resources | SPZ Legal](https://spzlegal.com/blog)

# [Public Benefit Corps: The For-Profit/Nonprofit Hybrid](https://spzlegal.com/blog/social-enterprise/for-profit-nonprofit-hybrid)

 Written by [Ryan Shaening Pokrasso](https://spzlegal.com/blog/author/ryan) | Feb 20, 2019, 8:29:56 AM

## For-profit, non-profit, or hybrid? There may be a better choice for maximizing your social impact.

When building a business centered around a mission or a specific impact-focus, founders often face a fundamental question: how do we structure our company to ensure long-term impact while accessing capital for growth? The best option for many mission-driven businesses is a Public Benefit Corporation (PBC)—a for-profit entity that embeds its social or environmental mission into its legal framework.

This guide explores why Benefit Corporations can be good structure for mission-driven founders looking to balance impact and profitability. Note that in this article, we are largely focusing on Delaware PBCs, but note that in California, a public benefit corporation may refer to a nonprofit entity.

## For-Profit Companies Can Create Social Impact

Many entrepreneurs assume that social impact and profit are mutually exclusive. But for-profit companies can—and do—embed impact into their business model. [Patagonia](https://usca.bcorporation.net/zbtcz9z23zpatagonia-and-b-corp-community-co-create-a-new-model-of-capitalism/#:~:text=For%20Patagonia%20Founder%20Yvon%20Chouinard,help%20shape%20a%20stakeholder%20economy.), for example, has structured its ownership to reinvest profits into environmental initiatives. But beyond a huge and very well established company like Patagonia, many early (and mid-late) stage startups are also structured as PBCs.

### Why Choose a Benefit Corporation?

- **Legal Protection for Mission:** A Public Benefit Corporation (PBC) allows businesses to legally commit to a mission beyond profit maximization without the same risk of breach of fiduciary duty claims that traditional corporations face.
- **Access to Capital:** Unlike nonprofits, PBCs can raise venture capital and traditional equity financing.
- Attract Impact-Driven Investors: Many investors seek businesses that prioritize social impact initiatives—Benefit Corporations may provide this assurance. For example, some impact investors are looking for opportunities for [“Program Related Investments”](https://spzlegal.com/blog/funding/program-related-investment) and PBCs can be a good target for such investments.

For mission-driven startups looking to attract investment while ensuring long-term impact, structuring as a Delaware Public Benefit Corporation (PBC) can be a great approach.

## Choosing the Right Entity for Raising Capital

The ability to raise capital is a key factor when structuring a mission-driven business. A Delaware PBC is often the preferred entity for many social impact businesses that plan to scale through equity investment.

### How PBCs Attract Investment:

- Can Raise Venture Capital: PBCs can secure traditional startup funding by using industry-standard documents like[NVCA model investment agreements](https://nvca.org/model-legal-documents/).
- Tax Benefits for Investors: PBCs structured as [C-Corps](https://spzlegal.com/blog/incorporation/c-corp-basics) can qualify for[Qualified Small Business Stock (QSBS) tax benefits.](https://spzlegal.com/blog/qsbs-tax-benefits-a-guide-for-startups-and-investors)
- **Legal Flexibility:** PBCs must consider their mission in decision-making, but they also retain flexibility to scale and grow like any other for-profit business.

Key Takeaway: A Public Benefit Corporation (PBC) allows startups to raise capital like a traditional for-profit company while embedding their mission into their legal DNA.

## Why Benefit Corporations Can be Better Than Nonprofits for Scaling Mission-Driven Businesses

Nonprofits can be a great choice for businesses that rely on donations and grants to operate. However, for mission-driven businesses that want to grow using investment capital and generate profits, Benefit Corporations may be the way to go.

### Why Benefit Corporations Make Sense for Social Enterprises:

- - **No Restrictions on Revenue Streams:** Nonprofits have limitations on how they generate revenue, while PBCs have more flexibility.
    - **Investor-Friendly:** Unlike nonprofits, PBCs can issue equity and attract venture capital.
    - **Communicate Impact Across the Company:** When a startup is set up as a PBC, it is a clear message that impact is a high priority for the business. This can be a helpful communication tool to staff, vendors, customers, and investors who care about impact.

Bottom Line: If your goal is to maximize impact while raising capital and growing sustainably, a Benefit Corporation may be the ideal choice.

## Legal Considerations for Benefit Corporations

### Reporting Requirements for PBCs

Delaware PBCs must report on their mission impact every two years. This report is shared with shareholders but does not have to be public.[Read more about reporting requirements here.](https://spzlegal.com/blog/social-enterprise/benefit-corporation-reporting-requirements)

### How PBCs Protect the Mission

In traditional corporations shareholders can sue directors for not maximizing profits. In a PBC shareholders can hold leadership accountable for neglecting the company’s stated mission. Changing a PBC’s mission requires a 75% shareholder vote.

### B Corps vs. Benefit Corporations

- **Benefit Corporation (PBC):** A legal structure that ensures a company prioritizes its mission.
- **Certified B Corp:** A third-party certification that certifies a range of practices focused on impact and sustainability (akin to an organic certification).

## FAQs About Structuring a Benefit Corporation

### Will it cost more to incorporate a PBC?

No. Setting up a PBC is no more expensive than forming a traditional corporation.

### Will it be harder to raise funding?

No. PBCs can raise traditional VC-style funding (indeed at this point, many many startups structured as PBCs have raised a lot of VC funding and have had successful acquisitions and IPOs), and appeal to impact investors.

### Does SPZ Legal have experience helping mission-driven startups?

Yes. We’ve worked with many companies to structure their business for both impact and growth.[For example. see how Verto Education made the shift.](https://spzlegal.com/verto-case-study)

### Will it be harder to get acquired?

No. Many PBCs have successfully raised capital and exited through acquisitions or IPOs.

## Final Thoughts: Benefit Corporations Are a Great Structure for Impact-Driven Startups

Your business structure should align with your mission, funding strategy, and long-term goals. If you’re a mission-driven founder looking to balance profit and impact, a Delaware Public Benefit Corporation (PBC) can be a great choice.

Need help structuring your startup?[SPZ Legal specializes in helping mission-driven businesses navigate incorporation, fundraising, and compliance.](https://spzlegal.com/)

[View full post](https://spzlegal.com/blog/social-enterprise/for-profit-nonprofit-hybrid)

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