October 26, 2026
A public benefit corporation (PBC) is a for-profit corporation that names a specific public benefit in its certificate of incorporation and requires its board to balance that benefit, the interests of people affected by the business, and stockholders' financial interests. You can form one from day one or convert an existing corporation, and most of corporate life, from fundraising to taxes to an IPO, works the same way it does for any Delaware corporation.
Westaway was one of the first law firms in the benefit corporation movement, and we filed many of the first benefit corporations in states across the country. Kyle Westaway has taught the subject at Harvard Law School and wrote a book on it, Profit & Purpose. In a little over a decade the PBC has gone from a niche choice for mission-driven consumer brands to the structure behind some of the most valuable companies in the world, including Anthropic and OpenAI. This guide covers what a PBC is (and isn't), how it differs from a B Corp, how to form or convert, what the board has to do once you are one, and how investors, acquirers and public markets see it. It focuses on Delaware, where nearly all venture-backed PBCs are formed, with a short note on other states at the end.
Key takeaways
DGCL Section 362 describes a PBC as a for-profit corporation "intended to produce a public benefit or public benefits and to operate in a responsible and sustainable manner." Delaware added the PBC to its statute in 2013. A public benefit is a positive effect (or the reduction of a negative effect) on people, communities or interests other than stockholders in their capacity as stockholders, and the statute's examples range from educational and environmental to scientific and technological. Your certificate of incorporation must state the specific public benefit you choose. Anthropic's, for example, is to responsibly develop and maintain advanced AI for the long-term benefit of humanity.
The PBC reflects the idea, often called stakeholder capitalism, that a business can serve its stockholders and society at the same time. It is not a charity. A PBC can raise venture capital, grant stock options, pay dividends, get acquired and go public. What changes is what the board may, and must, weigh when it decides.
If you are still choosing an entity, start with What Legal Structure Is Best for Your Startup? and C Corp vs LLC. A PBC is a variation on the Delaware C corporation venture capitalists prefer, not a separate category.
In most ways it isn't. Section 361 says the general corporate law keeps applying unless the PBC subchapter says otherwise. Three things are different.
The certificate of incorporation must say in its heading that the company is a public benefit corporation and must identify the specific public benefit. Since 2020 the name no longer has to include "public benefit corporation," "PBC" or "P.B.C." If it doesn't, the company must tell anyone it issues stock to that it is a PBC before issuing the stock. For more on charters, see Certificate of Incorporation: What It Is and How It Works.
Under Section 365, the board must manage the company in a way that balances the stockholders' pecuniary interests, the best interests of those materially affected by the company's conduct (employees, customers, suppliers, communities and the environment, for example) and the specific public benefit. In practice, that lets a mission-driven company pursue its purpose without the fear of legal challenges from stockholders for doing so. The charter says plainly that the company has a purpose and won't be run purely to maximize short-term stockholder value, so a board decision that serves the mission or a stakeholder at some cost to short-term returns isn't a breach of duty for that reason alone. Stockholders' financial interests still count: they're one of the three things the board weighs.
Section 365 also protects directors. A director satisfies the balancing duty with respect to stockholders if the decision is informed and disinterested and not one that no person of ordinary, sound judgment would approve. Directors owe no duty to the beneficiaries of the public benefit because of that interest. And unless the charter says otherwise, a failure to balance is not treated as bad faith or a breach of loyalty, so the usual exculpation and indemnification protections remain available. For the duties every director owes, see Fiduciary Duties of Startup Founders.
A PBC must send stockholders a benefit report at least every two years, and every notice of a stockholder meeting must state that the company is a PBC. Only stockholders can enforce the balancing duty, through a derivative suit by holders of at least 2% of the outstanding shares or, for a listed company, the lesser of 2% or shares worth at least $2 million. The public and the mission's beneficiaries cannot sue.
A PBC is taxed like any other corporation. Choosing PBC status brings no special tax treatment, does not make the company tax-exempt and does not make investments in it deductible. How the corporate tax rules apply to you depends on your facts, so talk to a tax advisor. Our S Corp vs C Corp FAQ explains how the corporate tax elections work.
The reasons usually come down to long-term decision-making, people and governance. Every company faces pressure to grow and return capital on tight timelines, and the pressure gets louder after an IPO. The PBC gives the board express legal permission to weigh the mission and stakeholders alongside returns, which attracts investors who share a longer horizon and gives directors cover for decisions that pay off slowly. Because a PBC must name its purpose in its charter and report on it, the commitment is concrete for candidates, employees and customers in a way a slogan is not. And for companies building high-stakes technology, the PBC is a way to give the board legal room to weigh societal impact against commercial pressure.
Be clear about what a PBC does not do. It does not lock in founder control, bind a future board's strategy, or stop stockholders from dropping PBC status by the same majority vote that adopted it. Companies that want stronger protection for their mission add other tools, such as a mission-focused trust or a special class of stock that elects directors. We cover those below.
A PBC fits best when the mission and the business grow together, so that the more the company sells, the more it advances the benefit named in its charter. A company whose product is the mission, such as affordable clean energy, better access to education or safer AI, is a natural fit. It fits less well when the mission is a side project the business could drop without changing what it sells, or when you can't describe progress in terms you could measure and report.
Be honest about the costs, too. You'll spend time explaining the form to investors who haven't backed a PBC, especially what the balancing duty means in a sale. The board has to document how it balances on major decisions, you owe stockholders a benefit report at least every two years, and every stock issuance and stockholder meeting notice has to say you're a PBC. None of that is heavy, but it's real, and it only pays off if the mission is genuinely part of how you plan to run the company.
If you're unsure, you don't have to decide on day one. A Delaware corporation can convert later with board and majority stockholder approval, though once you have preferred investors their consent will usually be needed too. And if what you mainly want is an outside credential that customers and candidates recognize, B Corp certification is a separate step with its own standards; see Is a PBC the same as a B Corp? below.
No, although the names cause endless confusion. A PBC is a legal structure created by state statute. A Certified B Corporation is a voluntary certification from the nonprofit B Lab. Any kind of company, including an LLC, can seek certification, and a PBC does not have to be certified.
B Lab overhauled its standards recently. The old points-based assessment, where a company needed 80 of 200 points and strength in one area could offset weakness in another, has been replaced by required standards across seven impact topics: purpose and stakeholder governance; fair work; justice, equity, diversity and inclusion; human rights; climate action; environmental stewardship and circularity; and government affairs and collective action. New companies began certifying under the new standards in March 2026, existing B Corps move over as they recertify, and certification now includes an audit by an independent, B Lab-approved assurance provider. Certified companies must also build stakeholder governance into their legal documents, which many do by becoming a PBC. For a Delaware corporation, B Lab's route to meeting that legal requirement is electing PBC status, so a Delaware company that wants certification should expect to become a PBC as well.
| Feature | Public benefit corporation | Certified B Corp |
|---|---|---|
| What it is | A legal entity form under state law | A private certification from B Lab |
| Who decides | The company's board and stockholders | B Lab and its approved auditors |
| How you get it | File a charter or charter amendment | Meet B Lab's standards and pass verification |
| Ongoing obligation | Balancing duty; benefit report to stockholders at least every two years (Delaware) | Meet the standards, recertify periodically, pay annual fees |
| How it ends | Stockholder vote to amend the charter | Certification lapses or is withdrawn |
If you already know you want to be a PBC, forming as one is the simplest path. The certificate of incorporation states in its heading that the company is a public benefit corporation and names the specific public benefit. Everything else follows the normal checklist in Delaware C Corp Incorporation Documents, and our default setup is the same as for any startup: 10,000,000 authorized shares at $0.00001 par value, founders buying restricted stock at fair market value with four-year vesting, a one-year cliff and an 83(b) election, and an option pool adopted at incorporation.
The most important drafting decision is the public benefit itself. Too vague ("make the world better") and it gives the board no guidance and readers no reason to believe it. Too narrow (one product, one city) and it boxes the company in as the business changes. A good purpose statement describes the effect on people or the planet you want to create in a sentence that would still make sense if your product changed. Two illustrations of the right level of detail: for a fintech company, "to expand access to fair, affordable financial services for people underserved by traditional banks"; for a climate company, "to accelerate the transition to clean energy by making low-carbon power affordable and reliable for homes and businesses."
A few details are easy to miss. Most startups issue uncertificated shares, so the PBC notice goes in the written notice under DGCL Section 151(f) that accompanies each issuance; any paper certificates must note conspicuously that the company is a PBC. If your name doesn't include "PBC" or "public benefit corporation," you must tell each person who receives stock that the company is a PBC before the shares are issued, so add a PBC notice to your stock purchase agreements and option agreements as a matter of course. Stockholder meeting notices must say so too. The bylaws barely change; see Startup Bylaws. And start recording how the board considers the public benefit from the first board meeting, which makes the first benefit report easy.
Delaware has made conversion steadily easier. In 2013 converting required 90% of the outstanding shares of each class. In 2015 that dropped to two-thirds, and in 2020 Delaware lowered it to the ordinary majority of outstanding stock and eliminated appraisal rights in a conversion. The same majority applies to leaving PBC status. For a venture-backed startup, the steps look like this:
Because investor consent is usually required, the best time to raise conversion is before or during a financing, when you are already amending the charter. See What Do Stockholders in My Startup Need to Approve? and What Does My Startup's Board of Directors Need to Approve?.
The core obligation is the balancing duty, and the core practice is documenting it. When the board makes a significant decision, such as a financing, a layoff, a major supplier choice or a sale, the minutes or written consent should show that directors considered the stockholders' financial interests, the affected stakeholders and the specific public benefit. That record is what lets directors rely on Section 365's protection if a decision is challenged. A single recital in the resolution is usually enough, for example:
RESOLVED FURTHER, that in approving the foregoing, the Board has considered and balanced the pecuniary interests of the stockholders, the best interests of those materially affected by the Corporation's conduct, and the specific public benefit set forth in the Certificate of Incorporation.
The recital is only as good as the discussion behind it, so make sure the board materials or minutes show what the directors actually weighed. Our FAQs on board meeting minutes and board consents cover the mechanics.
The second obligation is the benefit report. At least every two years, a Delaware PBC must give its stockholders a statement of the objectives the board set to promote the public benefit and stakeholder interests, the standards it adopted to measure progress, objective factual information based on those standards, and an assessment of how well the company met its objectives. Delaware does not require the report to be public, audited or certified, to include financials or to use a third-party standard, though the charter or bylaws can require a public report or a third-party standard. Many PBCs publish an annual report anyway because it builds credibility, and many founders fold the report into their regular investor updates.
Plan the first report from the day you become a PBC. Set the objectives and the measures at formation or conversion, track them alongside your other metrics, and have the first report ready within two years. A CEO letter or a section of an investor update works fine at the early stage. Whatever the format, every claim should be accurate and backed by data, because an overstated report creates risk even if only stockholders see it.
Yes. Stockholders' financial interests are one of the three things the board must balance, and nothing in the statute stops a PBC from pursuing an ambitious growth strategy or a large exit. What the board can't do is ignore the public benefit and affected stakeholders altogether. Directors who make an informed, disinterested decision that a person of ordinary, sound judgment could approve are protected under Section 365(b).
Generally not. PBC status isn't usually an obstacle to directors and officers insurance. Tell your broker the company is a PBC so the application is accurate, and confirm the policy covers stockholder derivative claims, including claims that the board failed to balance.
Yes. A traditional company can buy a PBC, and a PBC can buy a traditional company. The deal usually ends PBC status for the acquired business unless the buyer agrees to keep it. We cover how the board's duties apply in a sale below.
Yes. PBCs have raised from many of the most active venture firms and from crossover and public-market investors, and the AI labs have made the form familiar to a new generation of investors. The question we hear is less "will you be a PBC?" than "what does your PBC actually commit the board to?" Investors will read the public benefit to make sure it means something without limiting the business or a future sale, they will want protective provisions over any change to the purpose or PBC status, and they will ask how the board will balance in practice, especially in an exit.
The climate has also shifted. The backlash against ESG investing has made some investors wary of anything that sounds like a values pledge, while the AI labs have recast the PBC as a governance tool rather than a branding exercise. There is no solid evidence that PBC status by itself raises or lowers valuation. Value comes from the business; the PBC changes the legal frame in which the board makes the trade-offs every company faces.
Anthropic has been a Delaware PBC since its founding. It layered a Long-Term Benefit Trust on top: trustees holding a special class of stock elect a growing share of the board, eventually a majority. OpenAI completed a recapitalization in October 2025 in which its for-profit business became OpenAI Group PBC, controlled by the nonprofit OpenAI Foundation, which holds a large equity stake.
These structures show both the strength and the limits of the form. The PBC gives the board legal room to put safety and societal impact into the balance when commercial pressure points the other way. But it does not decide who sits on the board, and a majority of stockholders can vote to leave PBC status, which is why both companies paired it with another control mechanism. The flip side: xAI, formed as a Nevada benefit corporation, was reported in 2025 to have quietly ended that status in 2024. A PBC commitment is only as durable as the people who control the vote. For most startups the lesson is not to copy a frontier lab, but to decide honestly whether the PBC alone protects what you care about.
On its own, PBC status can be dropped by the same majority stockholder vote that adopted it, plus whatever investor consents your charter requires. If you want the mission to outlast a change in who controls the vote, there are three main tools, from simplest to most involved.
The first is the charter itself. Delaware lets a certificate of incorporation require a higher vote, or a separate class vote, for specific amendments, so the charter can require a supermajority to remove the public benefit or end PBC status. This is cheap, familiar to investors and easy to explain. Its limit is that it protects only what the charter covers, and the holders of the required vote can still change it.
The second is a stockholder agreement. Since August 2024, Section 122(18) of the DGCL expressly allows a corporation to agree with stockholders that it won't take specified actions without the approval of a named person or group. A company can use that to require, for example, a founder group's or a mission-aligned investor's consent before changing the public benefit. These agreements are new, and they have limits: they can't conflict with the charter, and directors still owe their fiduciary duties when deciding whether to honor them.
The third is a purpose trust or long-term benefit trust, which holds voting stock for the sake of the mission rather than for any individual owner. Patagonia is the best-known example: in September 2022 its founding family moved all of the company's voting stock, about 2% of its shares, into the Patagonia Purpose Trust and the nonvoting stock into a nonprofit, the Holdfast Collective. Anthropic's Long-Term Benefit Trust, described above, works differently but on the same idea, by electing a growing share of the board. Trusts are the strongest protection, but every one is custom built. They take time and money to set up, investors need time to diligence them, and trustees with veto rights can slow down financings and sales. In practice they suit later-stage companies with stable ownership more than an early-stage startup still raising venture rounds.
Founder supervoting stock is another option, and it can protect a mission while the founders are in charge. A Delaware charter can give a class of founder stock more votes per share than the stock investors buy, and Eric Ries argues in Incorruptible that founder control is a sensible starting point, as long as it's a bridge to a structure that doesn't depend on one person. Plan for the practical reality, though. Many venture investors resist high-vote founder stock in the first priced round, especially without a sunset, and some won't invest with it in place. Expect a conversation with your lead investor, and possibly a negotiation in which you agree to a sunset, limit the extra votes to specific decisions, or unwind the structure to close the round. Decide in advance which protections you'll hold firm on. Board seats, a voting agreement and narrowly drafted protective provisions are usually easier to keep. See Founders Preferred Stock for how those control tools work, and our Founder Guide: Building an Incorruptible Company for how founder voting fits with the other mission-protection tools.
In a traditional Delaware corporation, once a sale of control is underway, the Revlon line of cases applies enhanced scrutiny and requires directors to seek the best value reasonably available to stockholders. That does not mean taking the highest headline bid regardless of everything else, since directors can weigh certainty, financing and timing, but the focus is stockholder value.
In a PBC, the Section 365 balancing duty continues to apply in a sale. Directors may weigh the deal's effect on employees, customers, communities and the specific public benefit alongside price, and Section 365(b) protects an informed, disinterested decision a person of ordinary, sound judgment could approve. The statute does not so much repeal Revlon as change what the board is balancing. Delaware courts have decided very few PBC cases, so there is little guidance on how far a board can go in taking a lower bid for mission reasons. Document the process carefully.
Two practical points come up in almost every PBC exit. If the buyer is not a PBC, the merger usually ends PBC status for the business, and the board should weigh that openly. If the business stays a PBC inside the buyer, the deal documents should say how the mission will be maintained. For deal mechanics, see Startup Acquisitions: The 3 Types of Deals.
Yes. The legal process is the same as for any Delaware corporation, but the disclosure differs. PBC issuers typically add risk factors explaining that the focus on a public benefit may hurt financial performance, that directors must balance stockholders' interests against the public benefit and other stakeholders and may not resolve a conflict in stockholders' favor, and that PBC status could make the company less attractive to a buyer. Some well-known examples:
| Company | How it became a public PBC |
|---|---|
| Laureate Education | IPO as a PBC, 2017 |
| Lemonade | IPO as a PBC, 2020 |
| Vital Farms | IPO as a PBC, 2020 |
| Veeva Systems | Converted while public, 2021 |
| Coursera | IPO as a PBC, 2021 |
| Warby Parker | Direct listing as a PBC, 2021 |
Public markets are a tougher audience than venture investors. Public stockholders are more numerous and more focused on quarterly results, and the 2% or $2 million threshold gives activists a defined path to sue. A PBC that wants to stay one after going public should have a clear purpose, a reporting track record and a board that can explain its trade-offs.
This guide covers Delaware PBCs. Most other states have their own benefit corporation statutes, many based on the Model Benefit Corporation Legislation, and they often differ: a general public benefit rather than (or alongside) a specific one, an annual benefit report that must be made public, a required third-party standard, and in some states a designated benefit director. If you are building a venture-backed startup, we recommend Delaware anyway (see Where Should I Incorporate My Startup?), and the Delaware PBC is the version investors know best.
Becoming a PBC is easier to get right at formation than to fix later. For the other big early decisions, see our Founder Guide to Avoiding Legal Startup Mistakes. If you are raising, our guides to SAFEs, convertible notes, the seed round and the Series A walk through each stage, and all of them apply to a PBC.
If you'd like help forming a PBC or converting your company, see our Benefit Corporation Startup Package or contact us.
