Delaware Public Benefit Corporation (PBC) Formation Guide

💰

$289+

Minimum First-Year State Fees

🌱

Dual Purpose

Profit + Public Benefit

📊

VC Compatible

Can Raise Capital & IPO

🔒

Legal Protection

Directors Protected for Impact

✅ Why Delaware PBC?

Mission protection: Public benefit purpose embedded in charter—can't be removed by future investors. Legal protection for directors: Directors legally protected when prioritizing public benefit alongside profit. VC/investor compatible: Can raise venture capital, issue stock options, go public (Warby Parker, Allbirds IPO'd as PBCs). Stakeholder consideration: Directors must consider employees, community, environment—not just shareholders. Marketing advantage: Differentiate your brand with authentic social/environmental commitment.

⚠️ PBC vs. B-Corp Confusion

PBC is a legal structure (like LLC or C-Corp)—registered with Delaware. B-Corp is a certification (like Fair Trade or Organic)—granted by B Lab nonprofit after assessment. You can be a PBC without B-Corp certification, or vice versa. Many companies are BOTH (Delaware PBC + B-Corp certified). PBC costs ~same as regular C-Corp; B-Corp certification costs $1K-50K+ annually depending on revenue.

🎯 Is a Delaware PBC Right for You?

✅ Perfect Fit

Social enterprise or impact-driven business
Want mission protection from future investors
Environmental/sustainability focused company
Need to raise VC while maintaining values
Targeting impact investors or ESG funds
Consumer brand with social/environmental mission
Want legal protection for non-profit decisions
Planning B-Corp certification eventually
Employees/customers care about purpose

❌ Consider Standard C-Corp If...

Pure profit maximization is only goal
No specific social/environmental mission
VCs concerned about "dual purpose" (rare but possible)
Don't want biennial benefit report requirement
Purely financial/tech company with no mission
Worried about additional compliance burden
Want maximum governance flexibility (no benefit consideration)

📊 PBC vs. Standard C-Corp vs. Nonprofit

Feature	Delaware PBC	Standard C-Corp	501(c)(3) Nonprofit
Primary Purpose	Profit + Public Benefit	Profit maximization	Charitable/educational
Can Raise VC/Equity?	✅ Yes	✅ Yes	❌ No (donations only)
Can Go Public (IPO)?	✅ Yes	✅ Yes	❌ No
Stock Options for Employees?	✅ Yes	✅ Yes	❌ No
Profits Distributed to Owners?	✅ Yes	✅ Yes	❌ No (retained)
Director Duties	Shareholders + stakeholders	Shareholders only	Public/charitable mission
Benefit Report Required?	✅ Biennial (every 2 years)	❌ No	❌ No (IRS Form 990)
Tax-Deductible Donations?	❌ No	❌ No	✅ Yes
Formation Cost	Same as C-Corp	$289+	~$500-2K (IRS exempt)

📜 Defining Your Public Benefit Purpose

▼

Must be specified in Certificate of Incorporation: Clear statement of specific public benefit (not just "general public benefit")
Examples of specific benefits: "Reducing environmental impact," "Improving public health," "Promoting economic opportunity," "Advancing arts/sciences"
Can have multiple purposes: e.g., "environmental sustainability AND fair labor practices"
Must be more than profit: Can't just be "providing good products"—needs independent social/environmental purpose
Should align with actual business: Make it authentic to what you do (sustainable fashion, clean energy, education access, etc.)
Investor consideration: Some VCs love mission-driven companies; others want narrow focus—discuss with target investors
Amendment requires 2/3 shareholder vote: Changing public benefit purpose is difficult (intentionally)
Examples from public companies: Warby Parker (vision access), Allbirds (carbon reduction), Vital Farms (ethical food)
Legal standard: Directors must balance financial interests with pursuing stated public benefit

⚖️ Director Duties & Legal Protection

▼

Traditional C-Corp standard: Directors must maximize shareholder value (Dodge v. Ford principle)
PBC standard: Directors must balance shareholder interests, public benefit purpose, and stakeholder interests
Legal protection: Directors protected from shareholder lawsuits when prioritizing public benefit over short-term profit
Stakeholders defined: Employees, customers, community, environment, suppliers—not just shareholders
Business judgment rule applies: Courts give deference to director decisions balancing multiple interests
No guarantee of benefit priority: Directors CAN prioritize profit if they determine it best serves long-term benefit
Shareholder derivative suits: Shareholders can sue if directors completely ignore public benefit
Benefit enforcement: Only shareholders (not public) can sue for benefit enforcement—must own 2%+ or shares worth $2M+
Practical effect: Gives cover for decisions like: higher wages, sustainability investments, turning down acquisition offers

📊 Biennial Benefit Report Requirements

▼

Filing frequency: Every 2 years (biennial), not annual like franchise tax
Not filed with Delaware: Published to shareholders and posted publicly (usually on company website)
Must include: Description of ways company pursued public benefit, extent of benefit created, circumstances hindering benefit
Third-party standard (optional): Can assess against independent standard (B Lab, GRI, other frameworks)—not required
Transparency requirement: Report must be made available to public (post on website or provide upon request)
No state penalties for non-filing: Delaware doesn't enforce; but shareholders can sue for failure to report
Early-stage reality: Many startups do minimal reporting until later stage or going public
Public company scrutiny: If you IPO, benefit reports become SEC-adjacent compliance (investor relations matter)
Marketing opportunity: Many PBCs use benefit report as annual impact/sustainability report for PR
Third-party examples: B Impact Assessment (B Lab), GRI Standards, SASB, UN SDGs

💼 PBC + B-Corp Certification

▼

Two separate things: Delaware PBC = legal structure; B-Corp = voluntary certification from B Lab nonprofit
B-Corp requirements: Score 80+ on B Impact Assessment, legal accountability (PBC or benefit corp status helps), transparency
Cost of B-Corp cert: $1K-50K+ annual fee based on revenue; recertification every 3 years
B-Corp benefits: Marketing/branding, customer trust, employee recruitment, B-Corp community/network
Legal structure requirement: B Lab requires certified companies to adopt legal accountability structure (PBC ideal)
Many PBCs not B-Corp certified: Allbirds, Warby Parker, Coursera—PBC structure, not B-Corp certified
Timing recommendation: Form as PBC now; pursue B-Corp certification later when revenue/resources support it
Assessment process: ~6-12 months from starting B Impact Assessment to full certification
Is it worth it?: For consumer brands, YES (huge marketing value); for B2B SaaS, MAYBE (less customer-facing)

💰 Raising Venture Capital as a PBC

▼

Good news: Most VCs now comfortable with PBC structure—not the barrier it was 10 years ago
Impact investors: Many funds specifically target PBCs/B-Corps (DBL Partners, Ecosystem Integrity Fund, Kapor Capital)
Traditional VCs: Increasingly accept PBC if mission aligns with business model (not separate charity work)
Key for investors: Show how public benefit DRIVES business (customer loyalty, employee retention, brand value)
Term sheet considerations: VCs may want veto rights on public benefit changes, clarity on benefit vs. profit prioritization
Fiduciary alignment: Make clear that pursuing benefit will create long-term shareholder value
IPO track record: Warby Parker ($6B+ IPO), Allbirds ($2B+ IPO), Vital Farms, Coursera—all PBCs went public
Conversion option: Can convert from standard C-Corp to PBC (or vice versa) with 2/3 shareholder vote if needed
Red flags for VCs: Vague benefit purpose, benefit conflicts with profit, no clear metrics/accountability
Recommendation: Be upfront about PBC status from first investor meeting; don't hide it

🔄 Converting Between C-Corp and PBC

▼

C-Corp to PBC: File Certificate of Amendment with Delaware, specify public benefit purpose
Shareholder approval required: 2/3 (66.7%) of outstanding shares must approve conversion
Appraisal rights: Dissenting shareholders can demand cash payment for their shares at fair value
Cost to convert: $150 state filing fee + legal fees ($2K-5K for attorney to draft/file amendment)
Timing: Best to convert BEFORE significant outside investors (easier to get 2/3 vote from founders)
PBC to C-Corp: Also requires 2/3 shareholder vote; effectively abandons public benefit mission
Investor considerations: If you have investors, discuss before converting—some may object, others may support
After conversion: Must file biennial benefit reports going forward; can't ignore benefit purpose
Tax implications: Generally tax-free conversion (no different than other charter amendments)
When to convert: Early-stage (pre-funding) easiest; post-Series A harder but doable; post-IPO very difficult

🌍 Marketing & Branding Benefits

▼

Consumer trust: PBC status signals authentic commitment (not just greenwashing/CSR)
Differentiation: Stand out from competitors with legally-binding mission
Millennial/Gen-Z appeal: 73% prefer buying from purpose-driven brands (research consistently shows this)
Employee recruitment: Top talent increasingly wants to work for mission-driven companies
Retention advantage: Employees at PBCs/B-Corps report higher satisfaction, longer tenure
Press/media: PBC designation often newsworthy (especially if existing company converts)
Partnership opportunities: Other mission-driven brands prefer working with PBCs
Investor story: Impact investors specifically seek PBC/benefit corp structures
Transparency expectation: Must back up claims with biennial reporting—accountability matters
Examples of brand leverage: Patagonia ("Earth is our only shareholder"), Warby Parker (buy-one-give-one), Allbirds (carbon neutral)

📋 Corporate Formalities (Same as C-Corp)

▼

All C-Corp requirements apply: Board meetings, shareholder meetings, minutes, stock ledger, etc.
Organizational meeting: Adopt bylaws, elect officers, approve public benefit purpose, issue stock
Annual meetings: Shareholders vote on directors; directors vote on major decisions
83(b) elections: Founders must file within 30 days on restricted stock (same as C-Corp)
Stock options: Can issue ISOs, NSOs, RSUs—all standard equity compensation available
409A valuations: Required for option grants (same $2K-5K cost as C-Corp)
Annual franchise tax: Same calculation as standard C-Corp (~$200-450 for typical startup)
Additional PBC-specific: Biennial benefit report + public benefit consideration in board resolutions
Document benefit decisions: Board minutes should reflect consideration of public benefit when making major decisions

🧮 Delaware State Fees (Same as C-Corp)

Certificate of Incorporation (online filing) $89

24-Hour Expedited Service (optional) $100

Same-Day Service (optional) $100

2-Hour Rush Service (optional) $500

Annual Franchise Tax (10M shares authorized) $400

Registered Agent Service (annual) $50-300

EIN Application (IRS) FREE

Minimum First-Year State Total $289+

💡 No Additional State Fees for PBC

Delaware PBC formation and annual fees are identical to standard C-Corporation. There is no extra cost to form as a PBC instead of C-Corp. The only additional requirement is the biennial benefit report (not filed with Delaware, no state fee). This makes PBC a low-cost way to build mission protection into your corporate structure.

📅 PBC Compliance Timeline

Day 1 — Incorporation

File Certificate of Incorporation with public benefit purpose$89

Week 1

Hold organizational meeting • Adopt bylaws • Affirm public benefit purpose • Issue founder stock

Within 30 Days

FILE 83(b) ELECTION on founder restricted stock (CRITICAL—same as C-Corp!)

March 1 Annually

Pay Annual Franchise Tax to Delaware$200-450+

Every 2 Years (Biennial)

Publish Benefit Report to shareholders and public

Ongoing

Annual shareholder meeting • Quarterly board meetings • Consider public benefit in major decisions

🚀 PBC Formation Process

Define Your Public Benefit Purpose

Identify specific social/environmental benefit • Must be authentic to your business • Will be embedded in Certificate of Incorporation

Choose & Verify Corporate Name

Search Delaware database • Must include "Corporation," "Corp.," "Inc.," etc. • Check domain/trademark availability

File Certificate of Incorporation

Include public benefit purpose statement • Specify authorized shares • Name registered agent • File online ($89)

Hold Organizational Meeting

Adopt bylaws • Elect officers • Approve benefit purpose • Authorize stock issuance • Document in minutes

Issue Founder Stock & File 83(b)

Execute stock agreements • Issue certificates • CRITICAL: File 83(b) election within 30 days

Obtain EIN & Open Bank Account

Apply for EIN via IRS.gov (free) • Open corporate bank account • Keep finances separate

Set Up Impact Measurement

Choose metrics for public benefit • Consider third-party standard (B Impact Assessment, GRI, etc.) • Plan for biennial reporting

Ongoing Compliance

Annual franchise tax • Corporate meetings • Biennial benefit reports • Document benefit considerations in board minutes

Delaware PBC Formation at a Glance

🎯 Is a Delaware PBC Right for You?

✅ Perfect Fit

❌ Consider Standard C-Corp If...

📊 PBC vs. Standard C-Corp vs. Nonprofit

🧮 Delaware State Fees (Same as C-Corp)

📅 PBC Compliance Timeline

🚀 PBC Formation Process

⚖️ Professional Delaware PBC Formation

✅ What's Included in My Attorney Fees

⚠️ Separate Ongoing Obligations (Not Included)

Delaware PBC Formation Intake

Get in Touch

Email

Attorney

Schedule a Consultation