B-Corps: A New Tool in the Innovator’s Tool Belt?

B Corporation

For those looking for innovative models for arts organizations beyond a traditional nonprofit B-Corps could offer an interesting alternative. Now legal in eight states, including New York, this structure may be more artist and arts friendly than a traditional for-profit corporation. B-Corps, or social benefit corporations, prioritize their employees, sustainability, and community benefit in addition to generating profits. According to the B Lab, a nonprofit that certifies B Corporations, a B-Corp has three major characteristics:

  • Comprehensive and transparent social and environmental performance standards;
  • Higher legal accountability standards;
  • Build business constituency for public policies that support sustainable business.

For arts organizations looking to grow their earned income strategies without losing the community and social benefit aspect that is central to their mission B-Corps offer an exciting possibility. Currently, most of the B-Corps certified by B Lab are tech start-ups or environmental businesses, but they also include artist-friendly organizations like the Freelancer’s Insurance Corporation.

I asked John Casey, an expert in nonprofit policy and an Associate Professor in the School of Public Affairs at Baruch College, about the potential benefits of B-Corps and how they are different from nonprofit organizations.  According to Casey,

“A B-Corp is a for-profit company that has an obligation to fulfill a social mission, whereas a traditional business corporation has a legal obligation to maximize profits. However, it doesn’t enjoy the same tax exemptions of a nonprofit and can’t receive tax-deductible donations or some foundation and government funding.”

The benefits of becoming a B Corp for an arts organization could be manifold. Casey explained that a B-Corp has, “The ability to raise capital and to have greater control over its activities and expenditures, as there are no governance requirements to have a board of stakeholders and no obligation to stick to the original nonprofit purposes.”  To clarify the purpose of B-Corps Casey explained that they were created for corporations to demonstrate their social responsibility, not as an alternative for nonprofit status. Currently, B-Corps range from real estate companies and dairy farms, to technology firms. Casey  acknowledges that an innovative arts organization may, or may not,  feel comfortable being a part of such a wide-ranging group of peers.

Image from B Lab

There are some potential drawbacks to the B-Corp model. The largest is that B-Corp is not eligible for charitable funding from foundations or individuals. Another disadvantage is the newness of the legislation, which means that fledgling B Corps could incur hefty lawyer fees to negotiate the new rules and regulations.  However, Casey also points out that, “B-Corps are part of a growing movement towards socially responsible businesses and social enterprises and have a lot of support, so I am sure any problems that arise will be resolved quickly.”

I think B-Corps are an exciting alternative for the arts because they enable arts-focused organizations to consider a for-profit structure that does not exclude community accountability. If enough arts organizations decide that becoming a B-Corp is a sustainable model it could it could shake the foundations of how arts are viewed and funded in the United States. As Holly Sidford illustrated in her report on equity in the arts, much foundation funding already goes to an elite group of large arts institutions. Perhaps B-Corps could become way for smaller, innovative, flexible organizations that serve specific communities to move away from, and break the cycle of dependence on, a traditional nonprofit, donor model.

Image by B Corp

I asked John Casey if he thought the B Corp model could be more sustainable than the nonprofit model for arts organizations, especially given the continued economic downturn. He stated that, “It depends on what the ‘business model’ is for the financial sustainability of the project. If sustainability requires philanthropy and tax exemptions then you have to stay nonprofit; if it requires capital and has a profitable product to sell you can be a B-Corp or fully for-profit. Everyone has to decide what is the best model financially.”

However, he emphasized that,

“In the end you can mix and match. Many organizations have multiple legal identities: a 501(c)(3) for tax deductibility; a 501(c)(4) for political and educational activities, and a B-Corp or LLC for attracting capital and generating profit through business activities not as directly related to the charitable mission.”

Casey underlines one of the key possibilities that B-Corps open up for new practices in arts organizations. While they may not replace the nonprofit model, they offer another alternative, and are another tool in the innovation toolbox. For forward thinkers the opportunity to utilize and create new and hybrid organizational models to support their vision and practice is the cornerstone of innovation.

Eleanor Whitney is a writer, educator, arts administrator and musician raised in Maine and living in Brooklyn, New York. She has also worked at the Rubin Museum of Art as the Coordinator of Educational Resources, the Brooklyn Museum as the Academic Programs Coordinator, and at POV/American Documentary as a development assistant. She is completing her Master of Public Administration degree at Baruch College and received her bachelor’s degree from Eugene Lang College in Cultural Studies and Education.