SOMEWHERE BETWEEN PROFIT AND NONPROFIT

The Low-Profit Limilted Liability Company (aka, the L3C) works to balance the nimbleness and clarity of a small business with the alternate income and capital opportunities of a nonprofit.

As a refresher, corporate forms are creatures of the tax code and liability laws. They exist to facilitate collaborative action for commerce or for social purpose. When forming a business, individuals and groups can select from many forms — S Corporation, C Corporation, LLC, LLP, Sole Proprietorship, and such — depending on the nature of the work they have in mind. The 501c3 nonprofit is a particular flavor of the Non-stock corporate form, designed to assist enterprises with a social or public purpose that can’t sustain their operations or capital needs through traditional markets (so philanthropy and volunteerism step in).

Unlike the for-profit world, which has a full palette of options for corporate form, social enterprises have had rather few. The 501c3 is required by most donors, government granting agencies, and foundations for gifts and grants. But it carries a cost, as well — it’s hard to manage, govern, and sustain, its awkward for enterprises that plan a profit (even a small one), and it tends to be permanent even when permanence isn’t required. Read More.

And read even more on the Nonprofit Law Blog.